Top Estate Planning Mistakes Farmers Make – Part 2

• March 9, 2012
• Paul Neiffer

Continuing our post from yesterday:

• I am worth less than $5 million, so who cares? – Well, for one thing your spouse might care.  We have a new estate planning opportunity called portability which allows the unused estate exemption to be transferred to the surviving spouse.  So let’s assume you pass away in 2011 worth $3 million.  If you did not file a return, the extra $2 million is permanently lost.  So if you spouse died in 2012 suddenly worth $7 million (especially if you left them everything in a “I love you” will), then they would owe $700,000 of estate tax that they did not need to pay.  Many farmers forget to include life insurance that they own in their calculations.  They might have an estate of $4 million, but $2 million of life insurance.  They think they are only worth $4 million, when they really are worth $6 million.
• Lack of Liquidity – Farmers are great at creating non-liquid net worth (farm land, equipment, etc.), but not as good at creating liquid assets to pay estate taxes.  Do you know how much your estate is going to cost your heirs and where the money is coming from.  Will it negatively impact the farm operation?
• Proper Ownership of Life Insurance – If you own or control the insurance, it is included in your estate.  Have you considered setting up a irrevocable trust to own the insurance.   This gets the proceeds out of your estate and provides liquidity for the estate or income to your spouse for their lifetime.

, Farm Industry Trends, Farm Taxes, Legacy Planning | 1 Comment »