The movie Secretariat is entertaining for horse racing fans and casual observers alike, but it is also instructive from an estate planning perspective.
If you saw the movie you know that the family that owned and bred Secretariat was faced with the prospect of selling their farm just to pay the estate tax when family patriarch Christopher Chenery passed away.
There are those who say that the estate tax is something that only rich people have to think about. In fact, there are many hard-working farmers who are in possession of a great deal of valuable land, but they are land rich and cash poor.
The may have never had a single year during which they truly made an eye-popping sum of money. They work the land that they love and it means everything to them.
An ancestor may have purchased the land for a modest amount of money generations ago. Succeeding generations of the family earn a living as farmers and the land continues to grow in value while nobody accumulates an extraordinary store of personal assets outside of the value of the land.
Imagine a farmer who is in possession of land that exceeds $1 million in value. The estate tax exclusion was scheduled to be reduced to just $1 million at the beginning of this year if the so-called fiscal cliff was not averted.
A lot of farmers were holding their collective breath as we were headed over the cliff. Fortunately for them the 11th hour passage of the American Taxpayer Relief Act of 2012 resulted in a 2013 exclusion of $5.25 million per person.
It also kept the estate tax portable. So, if you are married your spouse could use the exclusion that was due to you after your passing. This results in a total exclusion of $10.5 million, and for many farm families this is enough to keep the tax man at bay for another generation.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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