Farm Succession Planning

Almost no one believed it would happen, but here we are: For the first time since 1915, the United States has no federal estate tax.

Congressional action nine years ago created the potential for this situation, and congressional inaction last year made it happen. At the 44th annual Heckerling Institute on Estate Planning, which I recently attended, many of the planners present were worried about their jobs. Not us.

The failure of Congress to act before the estate tax was repealed for this year creates as much confusion, opportunity and planning work as the tax itself did.

Because Congress before the end of 2009 did not address the “sunset” provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the estate tax and generation-skipping transfer (GST) tax were allowed to lapse for this year.

Next year, unless legislation changes things, the provisions of EGTRRA will expire and we will return to the transfer tax laws (generally, estate, gift and GST taxes) of pre-2002.

So in 2011, the rules would revert to a $1 million applicable exclusion for the gift and estate taxes, and a higher 55 percent tax rate, compared with the $3.5 million estate tax exemption and the 45 percent rate of 2009. The applicable exclusion is the sum of lifetime transfers plus assets passing at death that an individual can transfer without being subject to estate tax.

What does this mean for high-net-worth families? [Read more →]