You may have heard that you do not have to be concerned about the federal estate tax because it is only applicable to extremely wealthy people. In reality, this may or may not be the case, depending on your definition of “extremely wealthy.”
The line that is drawn between taxable inheritances and inheritances that are not taxed exists in the form of the federal estate tax credit or exclusion. In 2015, you can transfer up to $5.43 million tax-free; anything that you transfer that exceeds this amount would potentially be subject to the federal estate tax and its 40 percent maximum rate.
We should point out the fact that there is an unlimited marital estate tax deduction. The tax is not applied on transfers between spouses who are American citizens. You would be using your exclusion to facilitate tax-free asset transfers to anyone other than your spouse.
Farmers and Ranchers
Most people don’t have $5.43 million in cash, but there is such a thing as “cash poor and land rich.” We practice law in the Dallas, Texas area. It is no secret that there are a lot of ranches in Texas, and there are farms as well. People who work their own land may make a decent living, but they may not consider themselves to be rich when it comes to liquidity.
However, many farmers and ranchers own vast tracts of land that have been in their families for multiple generations. Their ancestors may have acquired the land inexpensively, and subsequent generations may have expanded piece by piece. Ultimately, the land may be extraordinarily valuable, and your property is part of your estate for tax purposes.
There have been many cases when families have been forced to sell their property to pay the estate tax. You should certainly be aware of this dynamic when you are evaluating the value of your estate.
Access Our Special Report
If you are a farmer or a rancher, you should certainly understand all the facts when it comes the federal estate tax. The land that you own has value that exceeds its value as it is determined by the Internal Revenue Service. Your family may have worked the land for a very long time, and it may represent an extraordinary legacy.
Fortunately, there are things that you can do to keep your property in your family. If you would like to gain an understanding of the strategies that can be implemented, download our in-depth special report. This report has been carefully prepared for farmers and ranchers, and it will provide you with a great deal of very useful information.
To obtain your copy of the special report, click this link and follow the simple instructions: Estate Planning for Farmers and Ranchers.