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(Part of a series of articles on charitable giving and the Union County Foundation by David Vollrath - Exec. Dir.) If you have ever found yourself in a situation where you would like to bring an abrupt end to a conversation here is a suggestion… just ask the party you are talking to what they think about estate tax reform. That topic for most people is about as exciting as watching CSPAN 2 reruns. The reality though is that estate tax legislation is of interest particularly to a county like ours that proudly hosts many family farms. Current estate laws provide for a $2,000,000 per person estate exemption for 2006-2008. In 2009 that estate exemption increases to $3,500,000 per person. Inexplicably the estate tax is scheduled to be totally repealed for one year in tax year 2010. Financial planners will tell you, (with their tongue planted firmly in their cheek), that for planning purposes 2010 would be a great year to pass away. Starting in 2011 the estate tax exemption per person reverts back to $1,000,000. Obviously estate tax reform is on the horizon since current provisions for exemptions in 2010 and beyond don’t make a lot of sense and/or don’t exist at all. Should owners of family farms advocate estate tax repeal? The actual effect of the estate tax on family farms is arguably modest. A primary argument for repealing the estate tax is that current estate tax law causes family farms to be sold rather than transferred to heirs. One of the main advocates for repeal, Sen. Jon Kyl (R-Az) states, "The special interests we’re trying to protect here are the family-owned businesses, the family farms." As indicated above, current estate exemptions would allow a farm owned by both the husband and wife a $4,000,000 combined estate exemption. In 2009 that combined exemption will be $7,000,000. Also under Sec. 2032A of the federal tax code a family farm may receive "special use" valuation that can reduce the value of a farm or ranch by up to $900,000 in 2006. In addition many farm families transfer farms into a family limited partnership (FLP). If the FLP is in existence for a significant period of time, the partnership guidelines are followed, and the parents retain the homestead and sufficient assets to provide for their support, then an estate discount of 20%-35% is often permitted. It currently appears that estate tax reform most likely will include provision for a $3,000,000 to $5,000,000 individual estate tax exemption. This will mean that the combined exemption for a husband and wife will likely be $6,000,000 - $10,000,000. With most family farms valued at less than $10,000,000 very few family farms will be subject to estate tax. This means the issue of estate tax repeal, as it relates to family farms, is perhaps not as critical as one might have perceived. It also portends that the "family farm" can continue to thrive in Union County… across generations. The Union County Foundation encourages you to work closely with your professional advisor(s) as you develop your estate plan and consider your present and future charitable goals. The Foundation is equipped to help you achieve your charitable goals by providing: planned giving and estate planning resource information, charitable gift annuities/life income plans, and a broad array of charitable choices including establishment of scholarship funds and donor advised funds. Please call us at 937-642-9618, email info@unioncountyfoundation.org, reference our website at www.UnionCountyFoundation.org or stop by our Marysville office at 126 N. Main St. We are committed to helping you.... “preserve your footprint in time.” |
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