|By Amy Bickel, The Hutchinson News, Kan.|
But it's a question that is looming amid the impending fiscal cliff: What will happen when he dies?
His two sons — Brandon and Darnell — want to return to the
"The boys could pay more in inheritance tax than I paid for the ground," Bortz said.
Small farmers affected
The estate tax issue arises because of the impending expiration of tax cuts signed by former President
For those inheriting the farm, it could mean watching the generational operation be pulled part, with children potentially having to sell off land or other assets to pay the ensuing taxes, say estate attorneys.
Complicating the matter is the recent spike in land prices, said
In 2011 alone, the value of
Miller said that this year he saw dryland acres in south-central
"Two (irrigated) quarters, and you would be over the threshold after
According to the
Another 4.1 million already are over the
All told, the potential estate tax would be an average
Some historic context
However, Miller reminds that some historical perspective is helpful, as it wasn't that long ago that tax rates were much higher. In the 1940s to 1960s, federal estate tax rates of more than 70 percent on large estates were in place, at a time when the estate tax did more to pay the bills for the federal government, as well as to reduce the gap between the very wealthy and everyone else.
In 2011, President
Obama's current proposal is a compromise approach, calling for a 45 percent tax rate for estates above
According to an article in the
Much attention has focused on other issues of the fiscal cliff, such as reaching a deal on income tax rates. Nevertheless, indecision looms, Miller said. Lawmakers have yet to compromise on a plan to avoid falling off the cliff. Meanwhile, a farm bill also hasn't been passed, either. Some farm programs also expire
"There is just a lot more uncertainly than before," Miller said. "Is it going to go to
"There are just a lot of questions if they don't get a deal done by the end of the year," Miller said. "The uncertainty, the tremendous growth in land values, makes it that much more important for farmers to be up to date" in their estate planning.
Clients are bombarding lawyers like Hays'
"I've been doing this for 16 years and I've never been so busy, ever, from an estate tax standpoint," she said, adding that the onslaught began after the election. "I think everyone was waiting to see how the presidential election would shake out."
Seibel said a couple came in Monday worth more than
There is a caveat, with an irrevocable trust, Seibel added. It has to be a true gift.
"They can't be in charge of it," she said. "They can't get income from it. Once they set it up, they can't reverse it."
Seibel added that a downside in gifting is the child is liable for any capital gains realized as the property increases in value.
The irrevocable trust is one popular method, she said. Another, with the increase in farmland values, is to do an estate freeze, or freeze the value of the land. For example, an heir can enter into an installment sale with his or her parents. They might set up a 20-year installment and make low-interest payments, with the value never rising despite the current trend.
Seibel noted that those who use up their tax allowance this year, such as the farm couple she worked with Monday, won't get one when they die unless there is a more generous tax law in the future.
Seibel also said that no matter what happens
The next generation
With sons returning to the farm,
He has worked some with attorneys on his estate, he said, but added, "I'm probably behind,"
His children would be the fourth generation, he said, adding that
While working on a truck Tuesday, Bergkamp said it seems like the farm inheritance goes to doctors, lawyers and the government — with less for the next generation.
Today, the family operation is a diversified cattle and crop operation, which includes registered black Angus, a commercial cattle herd, feeder cattle and a small feedlot, along with crops like wheat and corn.
However, with the average age of the
"I understand the need to redistribute the nation's wealth," Bortz said, but added, "I don't' want my boys to work 40 years for something I paid for for 40 years."
Who knows what will actually transpire in coming days, he said of lawmakers.
"They are acting like high schoolers waiting until midnight to get the term paper done," he said.
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