Editor's note: Shannon Linderoth is associate editor for Dairy Herd Management, a sister publication of Pork magazine
The clock continues to tick, and Congress continues to dither on what to do about estate taxes. The estate tax expired at the beginning of this year, leaving families in limbo about how to plan to distribute assets amassed over a lifetime among heirs.
If legislators do not pass a new estate tax measure, the tax rate will revert to a top tax rate of 55 percent after the first $1 million of the estate's value on Jan. 1, 2011, and that's before a state adds its own estate tax, if it has one, on the estate value.
The estate tax has always been contentious — but now the debate has taken on new life, notes the Wall Street Journal.
On average, farm and ranch estates have 84 percent of their assets tied up in real estate, according to the American Farm Bureau Federation. As has often been said, farmers are asset rich and cash poor. If land must be sold to pay the tax bill, it reduces the family’s chances for keeping the business operating since fewer acres usually means less income.
In the late 1990s, AFBF says, it took medium-sized farm operations 2.5 years to pay off estate taxes, which at that time were levied at the same 55 percent rate the country would see again if Congress does not take action this year.
The New York Post reports that Max Baucus (D-Mont.) will supposedly introduce legislation that would likely reduce the 2011 estate tax rate from 55 percent to 45 percent and cover estates worth more than $3.5 million.
At least that’s a starting point. What would be better would be to pass a bill that includes an exemption large enough to cover most farms and ranches, and that the exemption would be indexed to inflation.
Meanwhile, read the latest advice financial planners are offering to their clients who are trying to do the right thing in the midst of an uncertain outcome.
Let’s hope we get a more direct signal to follow soon.