<p>“in every case if Mom & Dad had any life insurance at all - the farm was ready to be inherited free and clear”</p>
<p>Kluge actually life insurance is income tax free (in most cases) and is only estate tax free if it is owned by a trust. Otherwise it is considered the same as physical property. But before anybody jumps to attack you or me, it is VERY simple to take care of this. Not hard at all, just a simple form with a couple of lines to fill out and a separate bank account to pay premiums out of. </p>
Kluge, I was timed out earlier and then it was Friday night lights (Yee-haw. Playoffs again!!) </p>
<p>I just want to save the individually owned farms and ranches. I was trying to say “As a Keynesian would say, I think it’s a worthwhile torturing of the tax code.” The question is not - do you, Opie or I know ways to beat the tax? Sure we do. But it shouldn’t come to that. </p>
<p>There are legitimate public policy reasons to exempt family farms and I have tried to set a few of them out . I have heard no argument on this thread otherwise. Opie wants to debate something we already know. I don’t need to debate tax planning strategy or vehicles. The real world is where widows get sick and need $200,000 in a hurry that wasn’t planned for, or divorces happen with son #1, or all the grandchildren die in a carwreck, or little Johnny has a $3m judgment filed against him that is not dischargeable in B’ruptcy. Or maybe all of those things at once or countless things no one can contemplate. If we could contemplate everything we’d all go the horseraces and forget about this other stuff. </p>
<p>Your world and the natural objects of your bounty can change dramatically in the blink of an eye. Many times the vehicles people are sold to “avoid tax” (and the worst of all, “avoid probate”) severely curtail the ability of the trustor to make drastic left turns or right turns as the then existing circumstances may dictate. That’s what I meant by making down the road decisions with right now facts. </p>
<p>To simply exempt family farms and ranches avoids those problems for a segment of our society that is dwindling away. I think it’s worth it. Y’all may not.</p>
<p>'mudge:
A) I actually don’t. That ship has already sailed.
B) People would cheat.
C) I’m all for utilizing tax law for public policy reason. There are, in fact, special provisions in the state tax law for farms. But I think this is mostly a nostalgic fantasy. A lot more family farms are “lost” due to junior’s rational economic analysis than taxes. Seriously, if a 20 or 30-something person’s parents die and he/she learnes that the family farm is worth $3 Million, are you surprised that most of them take the money and run? And we’re taxing coal miners a little extra so those heirs get their second through X million tax free?</p>
<p>See my post #236. This is what Bill Gates Sr. has been advocating (I heard him speak several years ago). He suggested raising the threshhold for taxing estates in order to protect small businesses, including family famrs.</p>
<p>marite, I liked Mr. Gates’ idea when I first read it in the full page ads . That was one impressive ad. Several major dailies at the same time if I remember correctly. </p>
<p>kluge, in our area (the only area I can speak authoritatively about) what happens is little Johnny takes the inherited large box of Crackerjacks and divides it into smaller boxes of Crackerjacks for sale. It is very rare to see a large tract stay together because as I said - you can’t pay market and “ranch” it. Of course the smaller box of Crackerjacks sells for more per ounce and that differential is as I’m positive you know, taxable. Oft times that differential is a substantial premium. </p>
<p>(edit: We just disagree. That’s all. It happens. No need to belabor the point further. )</p>
<p>BTW, I should have said earlier that none of this makes a dime of difference to me or my “estate”. My ranch ain’t that big anymore. My concern is my neighboring ranch families whose sole source of revenue is ranching.</p>
<p>curmudgeon maybe a solution would involve imposition of deed restrictions that would keep the ranch from being splittable or converted to a housing tract-- thus reducing market value. That would prevent cheaters it seems to me.</p>
<p>We don’t have a farm, but we’re doing everything possible to protect the assets we do have so that when we croak, our children (and perhaps grandchildren) will have something. It seems as if people think there’s something immoral about that. What’s that all about?</p>
<p>SBMom, you’ve hit the nail on the head The key to land use planning isn’t tax law, it’s land use law. If land can’t legally be subdivided, and can only be used for farming, it’s taxable value is limited to it’s value as a farm. Problem solved.</p>
<p>Of course, you’ll get lynched by the armies of “property rights” advocates who want to make sure that junior actually can make that killing by subdividing the back forty into Condo City. But it’s legal to do it, and it actually solves the problem Curmudgeon quite correctly notes - if that’s actually the problem you want to solve. On the other hand, the law of unintended consequences runs away with any “tax law” solution to the family farm question, hands down.</p>
<p>dke: There’s nothing wrong with that at all. The question is, how many millions should your kids get tax free when coal miners have to pay a tax on every dollar they earn? Always remember: every tax is unfair. The only question is, is this tax more unfair than the next one.</p>
<p>P.S. There already are a bunch of special provisions in the estate tax law for inherited farms and small businesses by the way.</p>
<p>FF (218) Like I said, ‘most’, which is not ‘all.’ You are likewise accusing me of generalizing when the my post did not do so. You however made the over generalization that farmers would rather farm and to keep the family’s land. Your statistics please.</p>
<p>You claimed that I was “all wet” for citing the fact that some (I never said all) farmers want to hold on to their land for farming rather than “plant houses”. I cited a close-to-home example. Curmudgeon followed with examples in Texas. </p>
<p>However, your justification for declaring me all wet was that “most” (but not even all) of the farmers that you know want to plant houses - implying that my thesis of some not wanting to do so was wrong. It is you who have put words into my mouth that were never spoken - I never said, “[all] farmers would rather farm and to keep the family’s land.” Get it?</p>
<p>when whoever it was used the 4million estate value, that was a ludicrous number to use to make a point- check out the # of people effected, especaiily farmers, by the estate tax</p>
<p>less than 3 percent of deceased adults in 2002 had estates subject to the tax, according to the nonpartisan Urban-Brookings Tax Policy Center and figures from the IRS.</p>
<p>Of the 440 taxable family farm and business estates in 2004, two out of five paid an average rate of only 1.6 percent. These were taxable estates valued at less than $2 million.Very large estates valued at over $20 million paid at an average effective rate of just over 22 percent, a hefty tax bite but well short of “everything.”</p>
<p>CGM: Thank you for injecting a dose of reality into the discussion. The fact is the “threat to family farms” is an effective, if bogus, emotional appeal with which to drive an entirely different agenda - eliminating the estate tax, which is one of the few remaining mechanisms for resisting the increasing concentration of wealth into the hands of a few. Every penny not raised through the estate tax will have to be paid by us - or as Mini points out, by our children, including all the ones who don’t inherit a dime.</p>
<p>regardless of how this debate ends concerning farming…Having previously been a farmer, I do wish that the government would keep out of the farming business, and the Society pay me for the effort and stewardship of the land. I enjoyed farming; I used to say that it was just me and God. It was people who messed things up.</p>
<p>"Opie wants to debate something we already know. I don’t need to debate tax planning strategy or vehicles. The real world is where widows get sick and need $200,000 in a hurry that wasn’t planned for, or divorces happen with son #1, or all the grandchildren die in a carwreck, or little Johnny has a $3m judgment filed against him that is not dischargeable in B’ruptcy. Or maybe all of those things at once or countless things no one can contemplate. If we could contemplate everything we’d all go the horseraces and forget about this other stuff. </p>
<p>Your world and the natural objects of your bounty can change dramatically in the blink of an eye. Many times the vehicles people are sold to “avoid tax” (and the worst of all, “avoid probate”) severely curtail the ability of the trustor to make drastic left turns or right turns as the then existing circumstances may dictate. That’s what I meant by making down the road decisions with right now facts. "</p>
<p>Curm, </p>
<p>Why this is downright socialist of you. Which party did you vote for last election?</p>
<p>It’s called risk. It’s called planning. Everything you whine about is a risk that could happen. Risk is minimized or eliminated by Planning. It’s the grasshopper and ant story. One plans ahead and works the other just lives for the day. Should everyone get a pass for being a grasshopper? I didn’t see you as a socialist, did you?</p>
<p>I dunno. I’m on the left wing of this discussion, but I certainly understand what curmudgeon is talking about. My clients are sophisticated people who have gotten sophisticated advice for years, and I don’t think I’ve ever seen an irrevocable life insurance trust (a standard estate-plannning tool) that lasted more than 4-5 years before people began to wish it had been drafted differently. You can plan to minimize estate taxes, and to finance them when they become due, but in doing so you lose flexibility that you may wish you had kept later on.</p>
<p>There are invadable trusts which are a great idea in my mind. Little Susie gets the dividends off of it but can’t touch the principal unless she needs it for law school or a dire medical emergency. She has to petition the trustee to invade it so there’s no going through the $$, buying cars and crashing them. My father was an investment counselor on Wall Street, and the stories he used to come home with were hair raising. He used to say that money came with its very own set of problems.</p>
<p>“but in doing so you lose flexibility that you may wish you had kept later on”</p>
<p>Again a different form of risk. You have to decide which type of risk you want to resolve. Woulda, coulda, shoulda. Each decision has a potential outcome that is different, you have to pick your own posion on this one.</p>
Live your life as best you can. Be responsible, fair and honorable, and set a good example for your children.<br>
Get your kids through college debt free if you can.<br>
If you have someone in your life with special needs, try to establish a means of responding to those needs, even after you die.<br>
If you have more money than you can reasonably expect to need in retirement, start giving it to your children (or whoever else you want to give it to) at the earliest possible opportunity.<br>
Beyond that, don’t worry about what happens after you die. You won’t care - you’ll be dead. If your kids inherit money (or a farm, or a small business) that may be a blessing or it may be a curse to them. The more money it is, the more likely it is to be a curse, in my experience. If you’ve taken care of 1 and 2, your kids should be all right. Having to work for a living like everyone else is actually not a bad thing. There’s really not a lot of personal benefit in inheriting millions of dollars, in my opinion - and I’ve known a few who have done so.</p>
<p>opie, I don’t whine and don’t appreciate your suggestion that I was doing it here. I have explained my position. Your only response to very real concerns I raised amounts to an untactful “So.” You know as well as I that those risks that I outlined happen everyday and cripple the best thought out “plans”. </p>
<p>An estate tax plan like marite suggests would make it unnecessary to give away control of your property before death. I think we should find some way to support a proposal like that. </p>
<p>I’m sorry if you are now scared witless that your $250 might not have been well spent. </p>
<p>And Opie, I’m actually a leftie on many issues including economic issues and I’m proud to be considered as one. But I also support an end to the death tax for family farmers and small business owners and own an assault rifle (or so it is classified) . Go figure. ;)</p>
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