About a week ago at a business event I heard someone make the claim that estate heirs must often sell a family-owned farm to pay the estate taxes owed after the primary owner dies. I wondered about the facts behind this claim. Let's go get those facts.
The Congressional Budget Office study titled "Effects of the Federal Estate Tax on Farms and Small Businesses" (published July 1, 2005) determined that only a small percentage of estates with family farms have liquid assets insufficient to pay estate taxes. Estates can value farms at a lower "current use" valuation provided they remain in operation for another 15 years. Many family farms do not even meet the minimum valuation threshold that would subject them to estate taxes. These qualifications exist to protect small family farms from liquidation if estate taxes place them in jeopardy.
The Land Trust Alliance has done leading-edge work on tax matters affecting farmland. Families can use land trusts to shelter portions of inherited land from estate taxes. There are plenty of legal ways to pass farms intergenerationally through estates without getting people all worked up with scare stories about liquidation to pay taxes. Check out IRS rules on small businesses and estate taxes for more details.
Remember that estates are considered as a whole and farmland is just one asset of your dead relative's wealth. Stop listening to baloney stories from scare-mongers who want to prompt you into unnecessary action. Don't let some slick sales jerk frighten Grandma or Grandpa into an early grave with a hard sell on some scam transaction. Throw that jerk off your farm.
