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Estate Planning Blog

Serving Clients Throughout North Central Missouri

estate planning

What Could Proposed Estate Tax Bill Mean to You?

U.S. Sen. Bernie Sanders has released proposed legislation named “For the 99.5%” Act. If passed in its present form, the legislation would bring estate tax exemptions back to the 2009 thresholds of $3.5 million per individual and $7 million per married couple. Exemptions are currently $11.7 million and $23.4 million, as reported by Think Advisor in a recent article “Sen. Bernie Sanders Introduces Estate Tax Bill.”

Larger estates would also be subject to higher tax rates. The current 40% tax rate would be raised to 45% and taxable estates larger than $10 million would be taxed at 50%, amounts greater than $50 million at 55% and any estates valued at greater than $1 billion would be taxed at 65%.

The same rates would apply for all gift taxes, for which the threshold would be lowered to $1 million.

Sanders spoke at a Senate Budget Hearing committee, stating that his bill was designed to have the families of the “millionaire class not only not get a tax break but start paying their fair share of taxes.”

Another bill introduced by Sanders would prevent corporations from shifting profits offshore to avoid paying U.S. taxes and restoring the top corporate rate to 35%, where it has been since 2016.

In contrast, Senators John Thune, South Dakota (R) and John Kennedy, Louisiana (R), introduced legislation in early March to repeal the estate tax entirely.

Frank Clemente, executive director for Americans for Tax Fairness, said the tax plan released by President Biden during his campaign also tracked the 2009 estate tax levels that are the basis of Sanders’ bill, but because of the higher tax brackets for larger estates, his group believes the Sanders bill would raise about twice as much revenue as the Biden plan.

History teaches us that there is a long distance between the time that a bill is introduced, and many changes are made as proposed legislation makes its way through the law-making process. In this case, it can be safely said that there will be changes to the tax and estate laws, and that may be the only sure thing.

Now is a good time to review your estate plan, if these federal estate changes will have an impact on your family’s wealth. Familiarity with your current estate plan and staying in touch with your estate planning attorney, who will also be watching what Congress does in the coming months, will allow you to be prepared for changes to the tax planning aspect of your estate plan in the near or distant future.

Reference: Think Advisor (March 25, 2021) “Sen. Bernie Sanders Introduces Estate Tax Bill”

 

Retirement Planning

What Is ‘Whole Farm Planning?’

Farm families should adopt a whole farm planning approach, when they develop strategies for the future success of their business. The whole farm approach lets families look at the internal structure of their business and then develop business, retirement, transition, estate and investment plans that work in harmony.

Ohio’s Country Journal’s recent article entitled “Whole farm planning” says that in the middle of most farms and agricultural businesses is the family unit, and valuable lessons can be learned by all the generations involved, by examining past successes and disappointments. The underlying values and goals of the family have a significant impact on the way in which family members treat each other and employees and make business decisions.

The analysis of the current state of a farm should also be done to determine the physical, fiscal and personnel status of the business. The operation’s efficiency should be examined and  any available resources that aren’t currently being utilized should be identified. The farm’s profitability, business structure, operating procedures and employee management should also be reviewed. It’s also helpful for the management team to pinpoint external influences that could affect the business in the future, such as governmental, political, economic, environmental, social or technological elements.

Once a family has finished its internal analysis, they can continue the planning process by developing business, retirement, transition, estate and investment plans. These plans all will need to work in concert to ensure the long-term viability of the business.

Business Plan. A comprehensive business plan helps the family develop a plan of action for production and operation practices, and also helps develop plans for the financial, marketing, personnel and risk-management sectors of the business.

Retirement plan. A strategy to help each business member meet his or her expected retirement needs should be created. The two main retirement issues to look at are the amount of money each family member needs for retirement and the farm’s obligation to the retirees.

Transition plan. This plan ensures that the business has the resources to continue for future generations. This helps the family examine its current and future situations, then develop a plan to transfer the business to the next generation.

Estate Plan. This entails determining how the farm assets and debts will be distributed upon the death of the principal operators. This plan, along with the transition plan, helps to address the way in which the off-farm heirs can be treated fairly, without jeopardizing the future of the farming heir.

Investment plan. The primary investments made by farm families are typically made in land, machinery. and livestock. Investments let farm families to save for future education or retirement needs and permit investment diversification.

Reference: Ohio’s Country Journal (Feb. 11, 2021) “Whole farm planning”

 

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