Make meaningful plans despite uncertainty
Well the latest in doomsday deadlines, the so called Financial Cliff has come and gone. On the surface at least, it appears as though the most recent wrangling in Washington has given us what some of the stuffed shirts are brazenly terming a Permanent figure on the amount that will be exempt from the Federal Estate Tax. That figure for this year anyway is set at 5.25 million dollars per person or 10.5 million for husband and wife with each additional dollar beyond this taxed at 35 percent.
Sounds pretty good and darn sure better than the 1 million and 55 percent rate that could have been the default should our bickering buddies not come up with a deal. At least at this rate we have somewhat kept up with rapidly rising land values. This sounds like a lot but if we put it in perspective, this basically allows you to pass on 10 quarters of land. At least in my neck of the woods, you can quite easily figure any quarter of decent farmground will bring a million bucks. As of now, anything beyond that is squarely on Uncle Sam’s chopping block.
I personally find the word Permanent as it relates to the Federal Government and Taxes as amusing as it is troubling. Have you ever seen taxes of any kind that
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did not fluctuate over time? Nothing in life is ever truly static (except for Death and Taxes) and there darn sure isn’t in the partisan and petty world of politics. If there is anything you can be assured of is that the political winds can and do change directions… frequently. You had just as well prepare for this as it will happen as surely as the weather will change.
Out here in the real world far away from Congress where folks still adhere to common sense we tend to see things a bit more clearly, and you need to use this vision to prepare for any contingencies that lay ahead as it relates to your ability to pass down the Family Farm fully intact. Most of us will not pass this day or this year for that matter and when the day finally comes that you leave this world, what will be left to your heirs?
This is totally dependent upon your willingness to actually sit down and do some advanced planning. Planning that is based on preparing for any and all possibilities. The hope for the best but be ready for the worst sensibilities immediately come to mind. It is wise to have all of your bases covered should there not be an unlikely fairy tale ending with little or no Federal Estate Tax due.
Now, not to be an alarmist or a pessimist; I say Taxpayer beware. The deficit continues to rise at a staggering rate with no end in sight. Politics has veered far away from mere differing in philosophies with both parties still respecting one another enough to manage to work out compromises that most of us can live with. It has now become in far too many cases a hateful and dysfunctional pit of petty partisanship where little is ever achieved other than continuing to kick the proverbial can down the road. Unfortunately this leads far too many of you to do the same exact thing and use the uncertainty of tax issues as a reason to not do any meaningful planning. Please, do not fall into this trap.
Dennis Foster has advised family businesses on estate and financial planning since 1991, and can be reached at 605-887-7069. His column is published the first Friday of each month.