Fourteen Years to Pay Estate Taxes
For 2009, a taxpayer can leave an estate of $3,500,000 tax free to his/her heirs. They can also leave an unlimited amount to their spouse. With proper planning, this means that most farm families will be able to shelter $7,000,000 or more in farmland values from the estate tax.
A benefit that the IRS provides to estates that have a large amount of real estate wealth such as most farmers would have is to allow the estate tax to be paid over a fourteen (14) year period. For the amount of the estate that is represented by land values, the estate can elect to pay interest only for the first four years and then spread the principal payments over the next ten years. The first $1,000,000 of tax related to these values is allowed an interest rate of 2% with the remainder at a rate that is still fairly low.
This election does have some drawbacks since the property needs to remain in the family and in production as a farm. But for most farm families, this is normally the goal.
Please check this election with your estate tax advisor since it may allow you to keep the farm in the family.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Comments are closed.