When you own a family farm or business, you need to be aware of the possibility of estate tax. Estate tax can be assessed upon your death. Unfortunately, in some cases, this tax ends up being very difficult for heirs to pay. Since the value of the business and farm count as part of your estate, the tax bill may be significant due to the value of the business assets and land value. Because most business and farm owners have much of their wealth tied up in these endeavors, there may not be enough cash or liquid assets to pay the estate taxes. This could create a difficult situation for your family members.
Upon your death, your estate is valued at its current fair market value, regardless of what you paid for the assets and property. If appropriate, a tax is then assessed. At this point, it is too late to do anything to reduce the estate taxes. Your heirs will have to pay and may need to sell the business or farmland or take out a loan. You can prevent this from happening, though, if you act early. Through strategic estate planning, you can eliminate or reduce the amount of estate tax your heirs have to pay upon your death. Hopefully, you can make it so your heirs do not have to pay any estate taxes at all.
The sooner you develop a plan to protect your business or farm from estate tax, the more likely you will be to find an effective solution. Your heirs deserve to benefit from the legacy you have created and to keep the family company or farm without incurring significant hardship due to federal estate taxes. Parman & Easterday provides invaluable assistance to business and farm owners in creating strategic estate plans aimed at limiting or eliminating estate tax obligations. Give our estate planning lawyers a call today to learn more about how we can help.
When Does A Farm or Business Trigger Estate Tax?
According to the Internal Revenue Service, estate taxes are assessed on the transfer of property after death. Only larger estates are subject to taxation. The specific value of an estate which is taxed changes periodically. While the majority of estates are not taxed, the threat of an estate tax is a big problem for people who own a business or a farm that counts as part of their estate.
As of 2016, an individual can pass up to $5,450,000 without incurring taxes. This tax is assessed if assets transfer to someone other than a spouse. An estate can be transferred tax-free to a spouse, no matter how large.
Each person is allowed to pass $5.45 million exempt from estate taxes and the exemption can be transferred to a surviving spouse. This means a married couple can transfer $10.9 million tax free. If one spouse leaves everything to the other, using none of this exemption, the other spouse gets two $5.45 million exemptions.
While this seems like a lot of money, land and company assets can easily be worth this amount. Unfortunately, the more valuable the land or business, the more money will have to be paid in taxes. If you have invested a significant amount of your wealth in your land or business in order to build its value, your heirs could have a hard time paying the taxes and other expenses without selling farm property, company assets, or the company itself. You don’t want this to happen to the company you built or to a farm which may have been in your family for generations.
An estate planning attorney will help you explore all possible options to avoid estate taxes. This could include strategic structuring of business ownership interests and stock transfers, the creation of trusts, or other possible solutions.
How a Parman & Easterday Attorney Can Help You Avoid Estate Taxes
At Parman & Easterday, our estate planning lawyers have extensive experience helping business owners and owners of family farms reduce or avoid estate taxes being assessed on their property and assets. To learn more and to get the help you need, give us a call at (405) 294-6860 or contact us online today.
- Understanding IRA Inheritance Planning: Key Considerations - September 14, 2023
- Irrevocable Trust Decanting Provides Flexibility - September 12, 2023
- Inheritance Planning Solution for a Spendthrift Heir - September 7, 2023