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.