Estate Tax Planning

Estate Tax Planning. I’m Greg Martin with today’s Line On Agriculture.

The estate tax or as it is more commonly called, the “death tax” certainly has a lot of people’s attention right now especially as election time is just around the corner. But there are some people that just don’t really understand what the estate tax really is. Tim McNamara is an attorney with The Law Office of William Yates in Sandwich, MA.

McNAMARA: The estate tax is basically the federal governments and state governments way of sort of making up some of their budget shortfalls by essentially taking some of the inheritance out of ostensibly wealthier families. When someone passes away it’s really not as much of an issue to tax them and it’s an easier way to get revenue than it is normally to tax with income. So it has been a popular way with both the fed and the state to get a little extra money into their coffers.

Even though McNamara works in the Cape Cod area the same principals apply since money is money regardless of how it was earned.

McNAMARA: At the level it’s at and where they want to put it it’s really going to affect a lot of family businesses more than anything else and where the primary asset in an estate is the value of a business it can rip apart the entire business in effect. It’s going to have to be sold in order for the tax to be paid.

So what can be done to get around this issue? McNamara says pre-planning is the key.

McNAMARA: There are a number of ways to sort of plan out for that and I think the preliminary one that people are familiar with is the lifetime gifting. With respect to the IRS a person or a couple is able to give as much as $13-thousand dollars each year per spouse to as many people as they like and there would be no need; no technical need to file a gift tax which is includable as part of your eventual estate tax.

He says there are other strategies to use to help work around the problem.

McNAMARA: Others have to do with bypass trusts which are kind of specific to states. And because we don’t know where the federal estate tax is going to be next year or 5 years from now or 6 years from now the effectiveness of strategies that are a little more complex, the effectiveness of it might not be that great. Those are just some of the strategies I think that farmers or anybody should be aware of.

Bottom line McNamara says is to get on it now and make sure you consult with an estate planner. To read an article on these strategies visit their website at www.cape-law.com.

That’s today’s Line On Agriculture. I’m Greg Martin on the Ag Information Network.