“Estate planning is not writing a will when you’re 80, it’s deciding how to buy the assets when you’re 40.”
Dr. Wayne Hayenga is an estate planner for the Texas cooperative extension service.
“There’s a federal estate tax. Now we’re up to an exempt limit of $2 million. Everyone can pass $2 million on to their family members at death with no tax. That’s good for 2006, 7, and 8. 2009 it’s going to be $3.5 million. 2010 it goes away, and 2011 it comes back to $1 million.”
So, from a tax standpoint...
“2010 is the appropriate year.”
All kidding aside, agricultural assets can present unique tax problems.
“They’ve got land, land, land, but they’ve got no money, and the rate of return for ranch land, particularly in the state of Texas is really very low. They can have a $3 million ranch and maybe only make 30 or $40,000 dollars a year which isn’t a super comfortable living for a family, and yet they’ve got huge dollars in assets.”
Which, without any planning, could mean selling some of the inherited land to pay the estate taxes.
“If there’s going to be an estate tax bill, most people I deal with, you know, that have estates that are taxable, we make plans to take care of that 5 or 10 years ahead of time. If there’s no planning done, it’s true, there’s a tax bill that’s due 9 months after the decedent’s death.”
Dr. Hayenga said he’d never known anyone who had to sell their farm to pay the tax bill, but he had encountered a few folks who just didn’t like planning.
“He was in the hospital. He was 92 years old. We asked him to sign a power of attorney and at the signature line when he was laying in the hospital one day before he died he wrote, ‘Not today.’”