When are you going to write something about the impending disaster facing families in farming with estates to pass from generation to generation? Several people asked that question of Indiana Prairie Farmer, beginning as far back as two years ago. They were concerned about the somewhat favorable exemptions that were set to sunset. They did sunset, and actually, there were no estate taxes on the books in 2010.
What everyone was worried about was that the Federal Estate Inheritance Tax was set to return with a vengeance beginning January 1 of 2011. The exemption was to drop to $1 million per person, or $ 2 million if a husband and wife farmed together, where the limit had been several years ago, plus feature top end tax rates on federal inheritance tax of nearly 55%.
So we did those stories, probably half a dozen scattered throughout 2010, either documenting what was coming, what the unknowns were, or how to protect yourself as best you possibly could if the inevitable happened and the much more restrictive limits and higher tax rates returned.
While nearly every expert was certain Congress had many more things on its mind than dealing with these tax concerns, low and behold, in the waning hours of the lame duck session, as part of the bigger, overall tax compromise, Congress set the limit at $5 million per person, or $10 million per couple, and maxed the top federal tax rate on inheritance tax at 35%.
So estate planning is no longer an issue, right? Some people who specialize in this area are afraid that's what some people may think. But they insist it's just as important today as it was Dec. 1, 2010, before anyone surmised this change might occur. For one thing, detractors point up, the new limits and rates are only for 2011 and 2012, with no guarantees after that point.
John Schwarz, II, an attorney from Stroh, says that estate panning is just as important now as ever. There are new tools you can use right now, but there are still all kinds of reasons to plan.
Besides federal inheritance taxes, there are other issues, including state inheritance taxes and possible probate costs, which can eat up more of a farm estate than many think. And at the same time, land values are accelerating, increasing the value of many potential estates on paper. He's a strong believer in continuing to do estate planning, no matter what Congress just did, or might do or undo in the future.