The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Plan Your Gifts for 2011 and 2012
May 16, 2011
With the tax law passed late in 2010, farmers now have a two year opportunity to pass on much larger assets during their lifetime than they had in previous years. Before the new law, a farmer could only gift $1 million during their lifetime without owing any gift taxes. A spouse could gift the same amount, so a farm family could give up to $2 million during their lifetime without gift tax.
In addition, a farmer and their spouse could give each year at least $10,000 (this has been indexed with inflation and is currently $13,000 for 2011) to as many people as they wanted to without eating into their lifetime $1 million exclusion.
For 2011 and 2012 only, this lifetime exclusion has been increased to $5 million for a farmer and their spouse. This allows up to $10 million of farm assets to be passed onto the next generation or the generation thereafter gift tax free (some states may have a gift tax and you would need to check the laws for your state). With proper planning, a farm couple could most likely gift up to $15 million or more in value using some type of entity structure such as a limited liability company or limited partnership.
With the rapid increase in farm land values, this two year window may be a great opportunity to substantially reduce a large estate tax burden later.