Attendees of the American Farm Bureau Federation’s 93rd Annual Meeting picked up valuable advice from Christopher Hesse on how to protect their estates. Hesse is a CPA with LarsonAllen Firm-Wide Tax Resource Group and a partner in a family farm.
According to Hesse, proper planning is critical to ensure an estate will be passed down to future generations, and not the government. The current death tax exemption for 2012 is $5 million. While Congress is expected to extend the current exemption to 2013, Hesse warns that if this is not the case, it will be reduced to $1 million. Any amount over the death tax exemption is subject to a taxable amount of 55% of the asset’s present value.
“It’s important to start the estate planning process now, because no one has a crystal ball that can predict the future,” said Hesse.
With the high price of farmland today, farmers and ranchers can easily find themselves having an estate worth more than $5 million. For these individuals, Hesse says there are several ways to transfer ownership of their estates.
One option is to start reducing total net assets through annual gifting. The government currently allows gifts up to $13,000 to be given to one individual without being taxed.
While Hesse encouraged members to begin setting up their estate plans, he offered some words of caution regarding estate trusts.
“One of the things people sometimes don’t realize is that if you just change your will, if you have an estate trust, the changes you make in the will do not effectively change the estate trust.”