Estate Tax Law – What changes mean to farmland?

By Howard Halderman

02 /22 /21

As the Biden Administration begins their work and Congress starts up one of the hotly debated issues is the potential for tax increases. The federal and state government support over the past year(s) was critical to keeping our economy moving, the general and agricultural economies, during the COVID crises. How do we begin to pay for all the debt incurred by the federal government? One way is to increase taxes and estate tax is one area that may see increases.

Currently the estate tax exemption in 2021 is $11.7 MM per person. This means over $11 MM passes tax free from you at your time of death to your heirs. This protects many farm families today and allows them to transfer the family farm to the next generation without a huge estate tax burden. At $8,000/acre this means a couple can transfer, over 2,900 acres tax free – assuming no other assets. The current top federal estate tax rate is 40% for all dollars over the exemption. There may also be state estate taxes, depending on your state of residence.

Right direction of your business. Collage President Biden proposed reducing the estate tax exemption back to $3.5 MM per person as in the previous tax code and increasing the top tax rate to 45%. If this were to pass Congress, a farm couple now can only pass 875 acres tax-free, assuming no other assets, and would pay 5% more on the overage than the current rate. What are your options if these changes occur?

We cannot predict if, when or how much estate taxes might change. We do know that making estate planning decisions sooner rather than later affords you more flexibility and will allow you to transfer more wealth to the next generation (while retaining full control). Halderman helped dozens of families over the years navigate estate planning processes by working with expert attorneys and accountants. We assist with guidance to a variety of legal experts who know farmland and estate planning techniques and completing appraisals, as needed.

Planning can reduce the estate tax risk and allow you to accomplish your goals of passing the farm to future generations. Halderman Can Help you start the process. Call your local Halderman Area Representative or me in our main office at 800-424-2324 to talk about your specific needs, your property and your options.