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Farmers Race to Transfer Assets Before Estate Tax Increases
Author: Scarinci Hollenbeck, LLC
Date: January 23, 2013
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Estate Tax Increase puts U.S. Farmers at Risk
Family-owned businesses and high-net worth individuals are bracing for a potential hike in federal estate taxes, but U.S. farmers are an overlooked segment that are expected to be particularly impacted by this scenario.
If lawmakers choose not to reinstate the Bush tax cuts, federal estate tax rates are expected to increase to 55 percent from its current level of 35 percent. In addition, the exemption will drop from $5 million to $1 million. The new rates coupled with rising prices for land have farmers in the Midwest concerned about whether the existing estate tax law will be extended, and some are already preparing for the worst-case scenario.
Many farmers are speeding up their succession land and quickly putting their assets into trusts or making gifts at an accelerated pace, according to agricultural news website the Capital Press.
“Some people are going to make gifts they normally wouldn’t have until later,” Kerry Arritt, an accountant in Burley, Idaho, told the news source. “It will cost their heirs a few million dollars if they wait.”
In other cases, some farmers are concerned that they may be forced to sell off significant shares of land in order to pay their taxes, according to The Associated Press. In some areas, such as Iowa, land prices have tripled in value, greatly increasing the amount of estate taxes some families will be subject to, the AP adds.
Further, analysts noted that the “big farming” industry is now simply the “farming” industry in most areas, and that many agricultural plot owners are not millionaires, but farmers who inherited small plots of land through previous generations. As a result, these landowners are most likely to be negatively impacted by the changes if they fail to succession plan now.
- Practices: Tax, Trusts & Estates
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Farmers Race to Transfer Assets Before Estate Tax Increases
Author: Scarinci Hollenbeck, LLC
Estate Tax Increase puts U.S. Farmers at Risk
Family-owned businesses and high-net worth individuals are bracing for a potential hike in federal estate taxes, but U.S. farmers are an overlooked segment that are expected to be particularly impacted by this scenario.
If lawmakers choose not to reinstate the Bush tax cuts, federal estate tax rates are expected to increase to 55 percent from its current level of 35 percent. In addition, the exemption will drop from $5 million to $1 million. The new rates coupled with rising prices for land have farmers in the Midwest concerned about whether the existing estate tax law will be extended, and some are already preparing for the worst-case scenario.
Many farmers are speeding up their succession land and quickly putting their assets into trusts or making gifts at an accelerated pace, according to agricultural news website the Capital Press.
“Some people are going to make gifts they normally wouldn’t have until later,” Kerry Arritt, an accountant in Burley, Idaho, told the news source. “It will cost their heirs a few million dollars if they wait.”
In other cases, some farmers are concerned that they may be forced to sell off significant shares of land in order to pay their taxes, according to The Associated Press. In some areas, such as Iowa, land prices have tripled in value, greatly increasing the amount of estate taxes some families will be subject to, the AP adds.
Further, analysts noted that the “big farming” industry is now simply the “farming” industry in most areas, and that many agricultural plot owners are not millionaires, but farmers who inherited small plots of land through previous generations. As a result, these landowners are most likely to be negatively impacted by the changes if they fail to succession plan now.