• FREE ESTATE PLANNING ARTICLES, FULL-LENGTH VIDEOS AND BLOGS!!

    First Name (required)

    Last Name (required)

    Your Email (required)

    Are you with the IRS or any federal/state government agency?

    Are you requesting the free Estate Planning Articles/Blog for your own personal planning? (required)

    Are you a practicing Attorney, CPA, or Trust Officer? (required)

    Are you a Financial Services Professional? (required)

    Please validate security code below

    captcha

  • Recent Articles

  • Estate Planning for Farmers & Ranchers

     

    “The Estate Tax can destroy the lifestyle you have worked hard to create and pass on to your children. If you want to preserve it for future generations, you’re going to have to fight just as hard to keep it as the IRS is going to fight to take it from you.”

    Most farmers and ranchers are emotionally committed to preserving the lifestyle. They believe that it fosters character, integrity, and emotional stability. Consequently, the children are encouraged to continue this way of life. Although you can argue whether or not the estate tax is fair, one thing is certain…the impact of the estate tax is disproportionately harsh on farmers and ranchers. While a wealthy non-agricultural person may find it unfair to lose 45% of their assets to the estate tax, it pales in comparison to an agricultural person whose family may lose an entire lifestyle.

    “Estate Tax Planning for Farmers & Ranchers 2032A”
    13min 52seconds

    Estate Tax Planning for Farmers and Ranchers- 2032A from Brian Singer CFP®,CLU,ChFC,CPA on Vimeo.

    How We Can Help You…

    A successful farm or ranch operation can take generations to accomplish and may happen in phases. Described below are the phases:

    Startup Phase

    One or more family members gain the necessary skills, financial resources, and land to get the operation off the ground and build it to the point where it can generate a reasonable income.

    Growth Phase

    The main objective during this phase is to grow sales through the acquisition of additional agricultural assets and operational efficiencies. Such growth may be debt financed. A prime concern is the ability to survive during tough market conditions and extreme weather. Debt reduction and a stable financial condition become increasingly important in the later part of this phase.

    Wealth Transfer Phase

    Managerial responsibility is reduced by parents and assumed by the younger generation. Retirement cash flow must be assured. Plans must be made for the orderly transfer at death, estate tax reduction, and the liquidity to pay estate tax. The focus becomes preserving the land and lifestyle for children and grandchildren.

    EBS Responsible Wealth can help you in the Wealth Transfer Phase. Our goal is to ensure that the farm or ranch remains viable, stable, and in the family after your death.

    Agricultural families, like most other families, want to minimize estate tax. However, it is much more critical with the agricultural family. Frequently there is a lack of liquidity to pay estate tax and limited ability to repay loans. Excessive debt, especially if interest rates rise, can be devastating. Having to pay a 45% estate tax, especially when added to existing debt, can destroy the operation.

    It is not just the estate tax and debt obligations that can tear apart the way of life.

    The different goals and aspirations of on-farm/ranch children vs. off-farm/ranch children, can lead to conflict and/or the dismantling of operations. If the children are divided about maintaining the operation, it is generally inadvisable to leave shared interests in the farm or ranch. Sources of conflict include the level of salary to compensate the operator/child, replacement of existing equipment and capital expenditures, expansion of operations, personal guarantees on loans, and worst of all, the off-farm/ranch child who wants an active decision making role in the operation. A strong desire to leave the farm/ranch to one or more children for continued operation can conflict with the desire for equitable treatment of off-farm/ranch children. If most of your net worth is the farm or ranch, how can you leave the farm/ranch to one or more children and still be fair to the off-farm/ranch children? Limited cash to equalize bequests between the on-farm/ranch and off-farm/ranch children makes failure more probable. It will be necessary to allocate some resources away from operations for the purchase of life insurance to achieve equity amongst children.

    And then there is the loss of a key person; your death along with all the knowledge and skills accumulated during a lifetime of work. Will the family farm or ranch remain profitable, be able to pay its debts, and survive paying a 45% estate tax without your skills?

    If a family farm or ranch operator is resistant to more complex planning strategies and unwilling to earmark working capital for the purchase of life insurance to create liquidity, passing on the farm/ranch way of life to the surviving children is likely nothing more than a dream.

    The problem needs to be attacked from five directions:

    The planning techniques being used by non-agricultural families are also generally available to agricultural families. In addition, there are opportunities for agricultural families generally not available to other estates.

    FREE ESTATE PLANNING ARTICLES, FULL-LENGTH VIDEOS, AND BLOGS!!

    First Name (required)

    Last Name (required)

    Your Email (required)

    Are you with the IRS or any federal/state government agency?

    Are you requesting the free Estate Planning Articles/Blog for your own personal planning? (required)

    Are you a practicing Attorney, CPA, or Trust Officer? (required)

    Are you a Financial Services Professional? (required)

    Please validate security code below

    captcha

    Special Use Valuation Under Section 2032A

    The Right To Defer Estate Tax Under Section 6166

    Tax Incentives For Conservation Easements

    Unless the estate is small enough where the value of the estate can be reduced to the point of no tax or a modest amount of tax, these special opportunities are often not the complete remedy they are sometimes proclaimed to be. Property values may have doubled and tripled since the 1990s.

    In the end, cash is king. You will either have the money to pay the estate tax or you won’t. You will either have the money to make payments on the portion of estate tax eligible for deferral under Section 6166, or you won’t. You will either have the money to treat off-farm/ranch children equitably, or you won’t. You will either leave the operator/child with sufficient liquid assets to continue the farm/ranch successfully, or you won’t. For most, life insurance is the critical planning component.

     

    Consider the following excerpts from an article in High Country News dated August 11, 2008…

    STEAMBOAT SPRINGS, COLORADO

    … ranchland prices have more than quadrupled. As a result, ranch inheritors who want to keep their land in the family often must come up with hundreds of thousands — or even millions — of dollars in estate taxes. Many heirs have little choice but to sell…

    …”The IRS doesn’t care if you want it for cows or condos” says Marsha Daughenbaugh, executive director of the Community Agriculture Alliance and a third-generation rancher near Steamboat Springs…

    …sharply rising land values put ranch owners in a bind….

    …in 1983, the family’s then-2,000-acre ranch was appraised at $800,000. Nine years later, when Holly’s 34-year-old brother died and she became the sole heir, the value was upped to $1.2 million…Then, in 1997…Holly’s father died in a car accident. The ranch’s new valuation came in at $2.3 million, and Holly had the standard nine months to come up with the estate tax — $400,000. Her sole source of income was the ranch, which she says cleared $28,000 a year…To raise the money, she tried to turn part of the property into a “land preservation subdivision”…When that effort failed, “I essentially had a fire sale” she says. “I had to sell off the most beautiful, emotional parcel — my river bottom.‚”…

    …Two hundred and forty-five acres of neighboring agricultural land sold last year for $3 million, or more than $12,000 per acre. At that rate (which is far from top-end in the area), Holly’s land now clocks in at a cool $22 million.

    “…It’s so unbelievable. I can’t even wrap my brain around it. My kids would owe $4 million if I died tomorrow” Holly says. “Now I understand why Aspen ranchers and Vail ranchers had to sell out.‚”

    …Conservation easements have long helped landowners reduce the value of their property while preserving the agricultural, ecological or open-space qualities of their land. But despite the extra $500,000 estate-tax exemption available for such easements, they might not be enough to solve the problem for farms and ranches in high-dollar communities…

    …Although wealthy landowners might have a few more options to avoid selling their land, the estate-planning choices are essentially the same, says Brad Tafoya, a Durango, Colo.-based estate planner. Generally, those choices include a combination of conservation easements, a family limited partnership that transfers the ranch value to the next generation over many years, and life insurance structured to help pay the estate taxes, says Tafoya.

    … she’s using all the recommended estate planning avenues except a conservation easement — an option she worries might be too restrictive to her heirs, since land values are “only going to continue to rise, and we know it,‚” she says. She’s saving an easement as a last resort.

    “…I don’t want to liquidate. I want to live and die here on my 1,800 acres.‚”

    Wherever you are located, email us at info@ebsresponsiblewealth.com to arrange for a free consultation. Our common sense approach to estate planning and life insurance to pay estate tax will help you get towhere you want to be.

    FREE ESTATE PLANNING ARTICLES, FULL-LENGTH VIDEOS, AND BLOGS!!

    First Name (required)

    Last Name (required)

    Your Email (required)

    Are you with the IRS or any federal/state government agency?

    Are you requesting the free Estate Planning Articles/Blog for your own personal planning? (required)

    Are you a practicing Attorney, CPA, or Trust Officer? (required)

    Are you a Financial Services Professional? (required)

    Please validate security code below

    captcha

    Internal Revenue Service Circular 230 Disclosure
    Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any tax advice set forth herein with respect to U.S. federal tax issues was not intended or written by E. Brian Singer, Shaun Singer, EBS Group, EBS Responsible Wealth, or EBS Business & Investment Group, Inc., to be used, and cannot be used, by you or any taxpayer, for the purpose of avoiding any penalties that may be imposed on you or any other person under the Internal Revenue Code.

    Our role is to help you evaluate planning techniques that can reduce your future estate tax and gift tax, and increase the wealth transferred to your family. Brian Singer is not an attorney. Although he is a CPA (Inactive-California), it is not his intention to become your CPA. He no longer engages in the practice of public accounting. This and any other analysis or discussion is not meant to address all the issues and risks as you might find in a technical legal analysis. That task, if necessary, and if you are willing to pay the fee, is the responsibility of your attorney. Brian Singer attempts to take complicated tax principles and reduce them to understandable techniques for the layperson, in plain English. Any discussion and/or written analysis are meant to give you an overview of the anticipated benefits to be derived by employing specific techniques.  Final responsibility for the tax aspects rests with the attorney of your choosing. All techniques require careful drafting by a highly competent tax attorney with specialized knowledge.  A concept that might work when competently drafted, could fail as a result of mistakes made in the documents prepared by an attorney not proficient in these areas. The appreciation rates, investment earning rates, tax rates, valuation discounts, and other factors are hypothetical assumptions.  The benefits from implementing any technique will ultimately be better or worse than described depending upon variation from the assumptions. There are no guaranteed results; either in an economic analysis or in application of the tax law. We hope you will decide to use our services. Any planning we propose is incidental to the purchase of insurance. Since insurance is used to pay estate tax, the less tax you will owe, the less insurance required. The planning is essential in the determination of your insurance needs. You are in no way obligated to purchase any insurance. If it makes sense for you, then buy it; if it doesn’t make sense for you, then don’t buy it. You are not expected to do anything that you feel is not in your best interest. We may choose to disengage at any time.

    Copyright 2011 © EBS Responsible Wealth