Estate planning is a process that can be complicated for anyone, and this is why legal counsel is so very important. This being stated, it can be especially challenging for people that own family businesses and farms. Fortunately, there are tried-and-true solutions that we can help you implement once we understand the nature of your situation and your estate planning objectives.
One common scenario that can exist is the need for a succession strategy that results in balanced inheritances. To explain through the utilization of an example, let’s assume that you own a business, and your daughter has worked alongside you throughout her adult life. She understands the operation thoroughly, and she is the natural successor after you pass away.
However, you have one other daughter who pursued a different career path. Your business is your most valuable possession, and you are going to transfer ownership of it to the daughter that has been running it with you. How do you balance inheritances under these circumstances? We can provide answers, and the exact strategy will depend upon the circumstances. A common solution is the purchase of life insurance that would be equal to the value of the business that you will be passing along.
Estate Tax Efficiency for Farmers
There is another scenario that can be a source of concern for people that own family farms. We have a federal estate tax in our country, and it carries a 40 percent maximum rate. The majority of Americans do not have to worry about paying this tax, because there is a relatively high credit or exclusion. This is the amount that can be transferred before the estate tax would become applicable. At the time of this writing, the federal estate tax exclusion is $11.2 million.
Many people have farms that have been in the family for generations. Over the decades, the land can become very valuable, even though the farmers are not extraordinarily wealthy when it comes to cash. This is the phenomenon known as “land rich, cash poor.”
Some of these people are in possession of land that is more valuable than the estate tax exclusion. As a result, family members can be forced to sell the farm to pay the estate tax. Fortunately, there are strategies that can be implemented to gain estate tax efficiency under these circumstances.
Contact Our Firm Right Now!
Our firm can help if you are a farmer or the owner of a family-owned business. We can sit down with you, gain an understanding of your objectives and the nature of your business or farming operation, and create a custom crafted estate plan that ideally suits your needs. If you are ready to get started, you can set up a consultation right now if you give us a call at 831-649-1122. You also have the option of sending us a message through our contact page if you would prefer to get in touch electronically.