In the past couple of weeks, I have discussed an issue that all family farms should undergo: transition planning. The alternative is potentially chaos and possibly the loss of the operation. From creating a will, to putting together an estate-management team, to getting all family members on the same page, transitioning a farm from one generation to another is certainly a hurdle for farmers and ranchers. To make the transition even more challenging, estate taxes have created an extra hurdle for many families. One BEEF reader sent in a letter about the federal estate tax and how upcoming changes will impact family farms.
Here is what this BEEF reader had to say:
If the federal estate tax exclusion amount is allowed to return to $1 million, and the tax rate to 55% in 2011, it will be devastating to family farms, especially in states like Virginia with high land values. Family farms, which with hard work and smart management, can earn enough income to modestly support one family, in some areas of Virginia have a fair market value of $8 million. If the owner dies in 2011 under the present law, the heirs (the family running and living on the farm) would have an estate tax to pay of more than $3 million. The only asset that family would have worth that amount of money would be the land on which they make their living.
Instead of continuing to use the land to grow fruits and vegetables, horse hay, beef, lamb and pork, they would have to sell a large part of it to people who could pay the fair market value for it, most probably not farmers. It is unlikely that it would be sold in one parcel; it would probably be subdivided, more houses built on it, and it would never again be a productive farm.
This disaster is exactly what will happen to family farms throughout the country, but especially in places like Virginia that have high land values. We desperately need your help to solve this problem.
What are your thoughts on the estate tax? Has your family been impacted by hefty taxes after a loss in a family? For additional information on the estate tax, see these BEEF resources on the topic.