Imagine a family that extended itself to the maximum purchasing farmland generations ago. They worked hard all of their lives and had some years that were better than others.
Though it was touch and go at times they were fortunate enough to be able to pay off their mortgage and pass the property on to the next generation.
The family farm is subsequently passed down time and time again. Those who work the farm make a living but they are by no means rich.
However, the land has appreciated over the years. Though the family is not truly wealthy the farm could be subject to the estate tax because of its steady appreciation. At some point the family may have to sell the farm simply to pay the estate tax.
This is a prospect that many farmers had to face as 2012 was coming to a close. One of the automatic tax increases that would have been implemented if we would have gone over the fiscal cliff involved the estate tax.
In 2011 the estate tax exclusion was set at $5 million with ongoing adjustments for inflation. In 2012 the exclusion was $5.12 million.
If no further tax relief legislation was passed the exclusion was set to go down to just $1 million. This certainly would have impacted many farmers.
Fortunately for these families the base $5 million exclusion with adjustments for inflation has been retained due to the passage of the American Taxpayer Relief Act of 2012. We have a $5.25 million exclusion this year, and this will keep a number of farms protected from the tax man.
- Avoiding Family Chaos in the Coronavirus Age - June 3, 2020
- Preparing for Coronavirus - March 31, 2020
- Beneficiary Designations and Other Non-Probate Transfers - February 24, 2020
