What is in this article?:
- Estate planning an important tool to insure transfer of farm assets
- Minimum shrinkage of assets
A goal of estate planning is to make sure we get our assets to those we want to have them, with minimum shrinkage due to costs, taxes, or other expenses, and to do it with maximum security — to know that all the necessary documents are in force, that we’ve established a way to pay for expenses, and that we’ve tried to reduce those expenses as much as possible.
George Steinbrenner, owner of the New York Yankees baseball team, died in 2010. Had he died in 2009 or 2011, his family might not have been able to continue its ownership of the team because of estate taxes.
But because he died in 2010, the tax laws then in effect were such that the family could keep the team.
“It was perfect timing,” says Frank Blossman, estate planning specialist with Mississippi Farm Bureau Casualty Insurance Company.
“So many times, we talk with people who think they’re close to their goals in estate planning, when in reality they’re quite far away,” he said at the annual meeting of the Mississippi Farm Bureau Federation at Jackson.
Farmers should continually be working with their estate planners to be certain they’re staying abreast of changes in the law and changes in their farm business, he says.
Regardless of the size of your estate, planning is important to insure that “if something happens to you today, your assets will go where you want them to go, to the people you want to have them,” says Bob Hughes, also a Mississippi Farm Bureau Casualty Insurance Company estate planning specialist.
“Years ago, farms were being lost to the tax man when one party in the operation died and taxes came due. Many farmers were asset and land rich, but cash poor, which often made it difficult for heirs to pay estate taxes.
“The IRS isn’t interested in taking land, tractors, cattle, or chickens — they just want you to pay your tax bills. So, planning is important to be sure things are shipshape at the time they’re needed in order to preserve assets and insure their transfer to another generation.
“You need to understand the differences between estate planning and estate tax planning, and some of the challenges your family will face at some point down the road, the strategies that can help you reduce some of the costs and perhaps even some of the taxes.
“Although estate taxes not as much a problem right now as they once were, it looks like they may be starting to rear their ugly heads again.”
In simplest terms, says Hughes, “Your estate is everything you own. When you die, all you own is poured into the funnel that is your estate: personal property, real property, business interests, retirement plans, life insurance, other assets.
“The objective is to pass all this to your heirs. The problem is that everybody’s funnel has leaks. Estate planning attempts to plug as many of those leaks as possible.”
Those leaks, he says, can include estate taxes, partial-year income taxes, any debts owed, attorney/accountant fees, probate costs, final expenses, and others.
Estate planning objectives have to do with accumulation, conservation, and transfer or distribution of assets, Hughes says.
“Almost everyone is in one of those phases. If you don’t yet have an estate, you’re trying to accumulate one. If you’ve accumulated some assets and wealth, you’re interested in preserving it, and with the economy and markets as they are today, preservation is becoming more and more difficult. Others are at a stage of life where they’re interested in transferring their assets to those they love and care about, rather than seeing them taken by some government entity.”