Family farm owners are often going to be in possession of large tracts of land that can be very valuable on the open market. However, most farmers will never sell the land voluntarily, because they use the land to make a living. They do in fact make enough to pay the bills, but a lot of farmers do not have enormous sums of cash on hand.
There is a federal estate tax in place that is applicable on large asset transfers. No one wants to pay the estate tax, but an individual who is inheriting an estate with a great deal of liquidity could do so if necessary. A person who was in this situation would not lose his or her livelihood.
This is not the case for many family farmers. If they lose their farms, they lose their jobs.
Estate Tax Exclusion and Top Rate
The line that is drawn in the sand with regard to who must pay the estate tax and who is exempt is defined by the federal estate tax exclusion. In 2014, the amount of the federal estate tax exclusion is $5.34 million. If you are a farmer, and your farm is worth more than $5.34 million, the estate tax is a factor.
It should be noted that the estate tax exclusion is adjusted annually to account for inflation. In 2015 the number may be a bit higher.
The maximum rate of the federal estate tax stands at 40 percent at the present time, but there have been proposals that would raise the rate to 45 percent in a few years. Clearly, this is a robust percentage that can jeopardize the future of your family. It is possible that the surviving family members could be forced to sell the farm to pay the estate tax. This has certainly been the fate of many family farmers and ranchers.
However, there are tax efficiency strategies that can be implemented. If you take the right steps, you can mitigate your estate tax exposure, and you may be able to keep the family farm where it belongs.
Free Report on Estate Planning for Farmers
There is a lot to take into consideration if you are a family farmer who is exposed to the federal estate tax. This post is scratching the surface, but we have a more comprehensive resource that is available to you.
Our firm has prepared a very special report that explains everything you need to know about estate planning for family farmers. This report is being offered to our readers free of charge, and you can obtain the download through this website.
To access your copy of this valuable report, click the following link: Family Farm Estate Planning Report.