Estate Tax Law Changes are Coming
I have been reading several articles lately on the possible estate tax law changes that will be coming. The Bush changes from about 8 years ago will be changed and soon.
Most agree that the estate exemption will most likely be around $3.5 to $5 million and indexed for inflation. Also, the gift tax exemption will also go back to being the same as the estate tax exemption. There are also signs that they will allow any unused exemption for the spouse who died to be carried over to the surving spouse.
For example, under the current law, if one spouse dies first and has nothing in their name, their estate tax exemption expires worthless. Under the proposed changes, if a spouse dies with assets of $2,000,000 and the estate exemption is $3.5 million, then $1.5 million would carry over to the surviving spouse.
A great change for farmers is an increase in the special use allowance up to about $3,5 million. This allows many more family farms to pass tax free to their heirs and keep it in farming. The special use valuation is a method that reduces the value of farm property to what it would be worth as farm use only. Many farmers are close to cities and their land is worth substantially more as development property than farm property. This special use allows the estate to value it as farmland only. There are many restrictions on this, but for those who it applies to, it can save substantial taxes and keep the land in the family as farmland.
As these changes wind their way through Congress, I will keep you updated.