Farm Estate and Succession Planning

By: Andrew Zenk via Legacy Project

Federal Estate Tax: What Is It? How Is It Calculated?

The federal estate tax is set “permanently” for $5,000,000 per person, indexed each year for inflation. “Permanently” means that it is not set to automatically expire, which earlier laws were. Recall December of 2012, when the estate tax was set to “sunset” from $5,000,000 to $1, j00,000 per person.

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Although no sunset provision currently exists, the permanency of the law is such until the government decides to change it through legislature. There are no current proposals to do so; but it is something to keep in mind, as a part of your ongoing estate planning.

The Federal estate tax rules require that a personal representative of an estate must ?le a federal estate tax return within nine months of a person’s death if that person’s gross estate exceeds the exemption amount for the year of death. Deaths occurring in 2014 have an exemption of $5,340,000. This will continue to increase each year, with the inflation provision. Note that this is for federal purposes. Check with your attorney on any state estate tax rules, specific to your local.

Calculating the estate tax begins with a determination of the decedent’s gross estate. This generally includes all of the decedent’s assets: real estate, personal property, cash and cash equivalents (grain inventories, for example.), his or her share of jointly owned assets and life insurance proceeds from policies owned by the decedent.  Once the gross estate is valued, allowable deductions are subtracted. These generally include debts, funeral expenses, legal and administrative fees, and related expenses.

Also, there are unlimited deductions for transfers made to surviving spouses and to charities. The deductions are totaled, and deducted from the gross estate valuation. Finally, once the deductions are accounted for, the net taxable estate is determined by adding in any taxable gifts (made after 1976), if not already included in the gross estate. Recall that taxable gifts are those which exceed the annual gifting allowance in any given year. These are tracked by a gift tax return, filed by the giver, at the time the gift is made.

Once the calculations are made, as described, you arrive at the decedent’s “net taxable estate.” If this is over the exemption for the year of death, then the decedent’s estate owes estate tax. The estate tax rate is 40%.

For married couples, the estate tax exemption is $10.68 million (2x $5,340,000.) Included in this is the concept and availability of “portability.” Portability is the ability for a surviving spouse to carry over any unused exemption allowance when the first spouse passed away, so long as the surviving spouse filed a Form 706 to claim it within 9 months of the first spouse’s passing.

There is more to detail with portability. . . . stay tuned!

Andy is an Agribusiness Consultant for AgCountry Farm Credit Services, Fargo N.D., a farmer owned cooperative and part of the Farm Credit System serving eastern North Dakota and northwest and west central Minnesota.

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Books by Dr. Jimmy T. (Gunny) LaBaume

Planned Grazing: A Study Guide and Reference Manual by Jimmy T (Gunny) LaBaume.

This guide is a detailed book review of sorts, but perhaps it would be more accurately described as an abstract that condenses 864 pages of detail into 189 pages of concentrated information. No more excuses for failing to properly plan your grazing. The booklet is available from Amazon.com in both soft cover and Kendall versions. Click here. 

CoverA Handbook for Ranch Managers A Comprehensive Reference Manual for Managing the Working Ranch. Click here to buy the paperback version from Land & Livestock International’s Rancher Supply aStore.

Digital media products such as Kindle can only be purchased on Amazon.com. Click Here to buy the Kendall Version on Amazon.com

To purchase an autographed copy of the book Click Here

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Product DetailsCall for a pizza, a cop, and an ambulance and see which one arrives first.

So, who does that leave to protect you, your life, property and family?

The one and only answer is: YOU

This Handbook is intended to help you exercise that right and meet that responsibility.

Combat Shooter’s Handbook is available from Amazon.com in both paperback and Kindle versions.

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The Betrayed: On Warriors, Cowboys and Other MisfitsThe Betrayed: On Warriors, Cowboys and Other Misfits.  Click here to buy the paperback version from Land & Livestock International’s Rancher Supply aStore.

Digital media products such as Kindle can only be purchased on Amazon.com. Click Here to buy the Kendall Version on Amazon.com

To purchase an autographed copy of the book Click Here

About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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