During 2012 there was a lot of uncertainty about the future of the federal estate tax. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was set to expire at the end of the year.
If this would have taken place without any new legislation, passing the estate tax exclusion would have been just $1 million in 2013, and the maximum rate of the tax would have gone up to 55%.
As we all know, there is a lot of farmland in the state of Iowa, and while many farmers may not be “cash-rich” as it were, they may possess some very valuable land. The prospect of a reduction in the estate tax exclusion was weighing heavily on the minds of many Iowa farmers.
“Last fall, when the threat was there of going to a $1 million (exemption), it was causing great concern considering the value of farmland in Iowa,” said Ryan Denman of the Duffy Law Office in an interview with the weekly newspaper Iowa Farmer Today.
Ryan then goes on to explain how our firm reached out to our clients who would be impacted if a reduction to the estate tax exclusion was to take place.
The president had been quoted as saying he was looking for a $3.5 million exclusion, so we went forward with the expectation that the exclusion probably wouldn’t get any lower than this once a compromise was reached.
In the end, the estate tax exclusion retained its $5 million base with ongoing adjustments for inflation. This year, the estate tax exclusion is $5.25 million.
In spite of this $5.25 million exclusion, Ryan suggested that ongoing planning is still necessary: “There are other benefits of doing the planning because clients are concerned farmland will continue to appreciate in value. We’ve had a crazy streak here with farmland going up 20-30 percent a year.”
Given increasing land values and ongoing adjustments to relevant laws you can be exempt from the estate tax one year and exposed the next. Because of the ever-changing landscape, it is important to keep in touch with your estate planning lawyer on an ongoing basis so you can make adjustments if and when they become necessary.