Now is a great time to focus on getting your will and estate plan in line. A key item to focus on with that planning is the estate tax. For that reason, estate tax was the topic of Episode 15 of "Leave a Legacy TV." In this episode Farm Journal succession expert Kevin Spafford visits with attorney Tom O’Diam to find out what you need to know about new estate tax laws.
O’Diam admits that there have been a lot of big changes in estate tax law between 2001 and 2011.
"In 2008 it was $1 million, in 2009 the threshold was $3.5 million per person, 2010 the estate tax went away, and then in 2011 it was supposed to come back at $1 million with a 55% tax rate," O’Diam says.
That isn’t the case today. On Dec. 17, 2010 Congress passed a new tax bill which increased the exclusion to $5 million per person for generation estate tax and gifting tax. O’Diam says it’s the first time they have reunified those exclusions.
Reunified means the exclusion you have for any transfers you make during your lifetime or after your death are the same. Anything over $5 million is taxed at a 35% tax rate, meaning a couple can pass on $10 million in assets untaxed.
Planning Is Important
O’Diam realizes that succession planning and estate planning are two different things. He says succession planning is focused on how you pass down the operation and estate planning focuses on how you give away what you have once you’re gone. He emphasizes that planning is extremely important in both cases.
"In my career, I have never seen estate tax ruin a family farm," O’Diam says. "What I have seen is lack of planning ruin the farm."
Coordinating the succession plan and the estate plan is key and not every attorney is suited for the process according to O’Diam. Because of the additional knowledge required to make succession and estate plans, it is important the attorney knows how to put them together.
"You need to find legal help that specializes in those areas," he says.
Farm operations are so large and complex that it is important to be sure every area of the operation gets the attention it deserves in the planning process, O’Diam explains.
It is best to interview some attorneys before you make a selection. This way you can filter out what you’re looking for and find the attorney best suited for your operation and your family.
For more information about the new estate tax laws watch the entire episode of "Leave a Legacy TV