A farmer may strongly desire to keep their farm in the family. There are a variety of different things that can impact how likely this desire is to be fulfilled. One is how the various estate planning issues related to the farm are handled in the farmer's will and other documents. Skilled attorneys can advise farmers on what steps they can take through estate planning documents to try to achieve their particular goals regarding what will happen with the family farm when they pass away.
Among the many estate planning issues that could have big implications for family farms are issues related to the federal estate tax. Some family farm operations are large enough that they could potentially trigger this tax. Among the things that can impact whether this tax would apply to a given family farm and, if it did, what sort of tax liability the farm would trigger is what the federal rules regarding the estate tax are. So, estate tax rules are another thing that could have significant ramifications for farmers who wish to pass on their farm to family when they die.
The Internal Revenue Service recently proposed changes to some estate tax rules that can touch on farmers. There are certain circumstances under which valuation discounts can be factored in when calculating the estate tax for the passing on of a farm connected to a family-owned partnership, corporation or LLC. The proposed changes would put greater limitations on the use of such discounts.
Opponents of the proposal argue that it could harm farmers by upping potential estate tax exposure.
There have been legislative efforts to try to prevent the proposed changes from coming into force.
What happens with these efforts and with the proposal generally are something some farmers might be watching very closely.
Source: Augusta Free Press, “American Farm Bureau opposes IRS proposal for estate taxes,” Oct. 29, 2016
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