An estate plan generally uses a variety of legal instruments, including wills and trusts, to distribute assets after a person dies. The pending estate tax code changes on these assets can have a profound effect on estate planning strategies for many Michigan families if Congress chooses to let them expire.
The agricultural industry is urging Congress to provide ranchers and farmers with permanent relief from estate taxes. Over 30 organizations, including the National Cattlemen’s Beef Association (NCBA), are involved in this effort. The current tax relief for estates is scheduled to expire in December 2012. Once that happens, the exemption level for individuals will decrease to $1 million, and the tax rate will rise to 55 percent.
The president of the NCBA, J.D. Alexander, said that the expiration of the estate tax relief will devastate the cattle industry, especially small ranch owners who cannot afford the increased tax burden. He added that economic recovery in the United States depends on continued relief from estate taxes.
The NCBA is lobbying for the individual tax exemption to be kept at $5 million, with a maximum tax rate of 35 percent. Its ultimate goal is to permanently repeal the estate tax entirely, which the organization has been attempting to achieve for decades. The estate tax is especially burdensome for ranches and farms since 96 percent of these entities are owned by individual families.
Those who need to plan an estate must decide the best way to minimize tax burdens and maximize assets as well as the tools used in which to distribute them, whether a land trust is appropriate, a revocable or irrevocable trust or a will. Estate planning typically includes provisions for minor children and any charitable donations along with measures to minimize the inheritance tax placed on beneficiaries.
Source: The Farm Press, “Congress urged to pass permanent estate tax relief,” Nov. 14, 2012