In a challenging economy, taxes are less popular than ever. Many people are seeking to legally protect the cash they've earned over a lifetime from estate taxes in particular. After all, they would rather their resources go to beloved relatives instead of the Internal Revenue Service.
One way to do that is to be familiar with the applicable laws. An important one is the lifetime federal estate tax exemption. A couple of years ago, Congress set the limit for that exemption at $5 million per person. That amount is indexed to inflation and has increased since the law was passed. It is currently $5.34 million per individual, meaning the exemption for a couple is a full $10.68 million. Of course, some farm property has appreciated substantially in recent years, going for as much as $1,500 an acre. At that rate, a 1,000 acre farm would be valued at $15,000,000, meaning taxes would still be owed on it.
One way to address this is with gifting. As of 2014, the tax code allows for each person to give up to $14,000 to a child or grandchild tax-free. If done early, that money can be put into an account where it will compound. Doing that lowers the amount of the estate that can be taxed.
Of course, the value of some farms will never approach threshold of the federal estate tax exemption. The owner of those that do, however, may want to consider gifting as one approach to reducing an expected tax burden. It has the additional benefit of making children and grandchildren very happy. An attorney who specializes in estate tax strategies can help a couple come up with additional approaches as well.
Source: Ag Web, "Tax Traps: Don't Get Stung by Estate Taxes" Boyce Thompson, Jul. 14, 2014