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.