Estate Planning and the Death Tax

How does the Death Tax hurt America’s legacy of family ranching?

  • In rural America, the death tax is considered one of the leading causes of the breakup of multi-generation family farms and ranches.
  • Farm estates are 5-20 times more likely to incur estate taxes than other estates.
  • Most of the time, these assets have already faced taxes two and three times over the course of a lifetime.
  • For asset-rich and cash-poor family businesses, the appraised value of rural land is extremely inflated when compared to its agricultural value.
  • At the time of death, farming and ranching families are forced to sell off land, farm equipment, parts of the operation, or the entire ranch to pay off tax liabilities.
  • Ultimately, death taxes hurt small and mid-sized family ranches, causing consolidation by bigger companies.
  • This is not a tax on the wealthy elite in America. The wealthy can afford accountants and estate planners to help them evade the tax. It’s a death warrant for small-to-medium sized family businesses.

What solutions are available to combat the Death Tax threat?

  • At the end of 2012, Congress passed the American Taxpayer Relief Act (ATRA) narrowly avoiding a return to a $1 million estate tax exemption with a 55 percent tax rate.
  • ATRA permanently extended the estate tax exemption level at $5 million per individual ($10 million per couple) and raised the top tax rate to 40 percent. ATRA also maintained the spousal transfer, step-up in basis and indexes the estate tax for inflation.
  • While NCBA continues to support the full and permanent repeal of the death tax, for the time being we have permanent relief. Permanency in the tax code provides greater certainty for estate planning.
  • ATRA also permanently extends the 2001 and 2003 tax rates for individuals with income below $400,000 ($450,000 per couple). Rates for incomes over these thresholds will rise from 35 to 39.6 percent. ATRA raises rates for dividends and capital gains from 15 to 20 percent over these thresholds.
  • ATRA provides a permanent patch for the alternative minimum tax (AMT).
  • Even though Section 2032A special use valuation can be used by many agricultural operations to protect them from devastating impact of estate taxes, an expansion of Section 2032A special use valuation beyond its current $1 million limitation would expand the exemption to cover more farm and ranch families who are willing to make a long-term commitment to their businesses. NCBA recommends that there be no limitation on the amount that property values can be reduced to reflect use valuation for estate tax purposes under Section 2032A.


Additional Information

NCBA Contact

Kent Bacus
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