Attorney Sandy Ard, of the Ard Law Firm, PLLC, writes about Estate Planning, Medicaid Planning, Veterans Benefits Planning, Wills, Trusts, Living Trusts, Pet Trusts, Special Needs Planning, Asset Protection, Elder Law, Farm Trusts and Non-citizen Spouse Estate Planning, Probate & Estate Administration, Business Succession, and Family Business Planning in Houston, Texas, and the surrounding areas.
It’s a simple equation. What you own and how you own it will determine your estate tax liability. Every taxpayer should make plans to reduce this liability, especially if you have a family farm. Otherwise, you may lose the farm to pay the taxes.
The Joint Economic Committee recently released a report on the devastating power unleashed upon the farm when an estate tax is triggered. Simply titled “Estate Tax Report Released,” the committee also considered the broader impact on the economy.
The report, approved by the American Farm Bureau Federation and examined in Farm Futures, notes that, while farm owners may have a great potential wealth … such wealth is tied up in land (an illiquid asset) and is not necessarily cash-in-hand.
However, the Internal Revenue Service doesn’t accept soil in payment. However, the IRS will hold you accountable for the estate taxes due on your land, even if you have to sell the land to pay for it.
"When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings, or equipment to keep their businesses operating," said AFBF President Bob Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax."
If you (or a loved one) own a family farm, then there is no time like the present to make proper estate plans to protect and preserve the farm and the family wealth it represents. You have worked hard to make a living from your farm. Isn’t it common sense to spend some time and money protecting and preserving it?
Reference: Farm Futures (July 26, 2012) “Estate Tax Report Released”