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Fiscal Cliff Moves Estate Tax In Right Direction

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What the fiscal cliff deal means for the death tax.

If you’ve been paying attention this first week of 2013, you already know that Congress passed a tax compromise that averts the fiscal cliff and makes permanent the federal estate tax with an exemption of $5.12 million/individual (indexed for inflation) and a tax rate of 40% for amounts over the exemption.

If you’ve read the January issue of BEEF, you know from my column that I won’t be happy until we have a permanent repeal of the death tax. However, because I’m a “glass-half full” kind of gal, I think this compromise is certainly a better option than the $1-million individual exemption with a tax rate of 55% that might have resulted had action not been taken in Congress.

I feared the worst and am okay with the actual outcome -- not because I feel it’s a perfect solution, but because it’s a step in the right direction. The real solution, in my opinion, is spending cuts -- not unfairly taxing the deaths of Americans who have already paid taxes throughout their lifetimes. Read my column here for a more in-depth look on this topic.

Forbes.com does a great job of further explaining what these new rates actually mean, answering questions about the portability of the exemption, the gift tax and the generation-skipping transfer tax. But, one of the finer details that made sense to me was that if one individual only uses $2.5 million, then the surviving spouse can have a $7.5-million exemption upon their death.

For a more in-depth explanation, check out this video by Randy McKee, an estate planning consultant, from White River, SD.


This week’s poll on the beefmagazine.com homepage asks, “What do you think of the fiscal deal?” With 167 votes so far, 80% say “it stinks”; while another 13% think it’s a good compromise, and the final 7% aren’t sure.

Take a minute to vote and scroll through the heated discussion in the comments section.

What do you think of the fiscal cliff decision as it relates to the estate tax? How will it impact your estate planning in the upcoming years?

Discuss this Blog Entry 10

Anonymous (not verified)
on Jan 8, 2013

The estate tax keeps us out of problems. I was already looking at ways to letally pass our real property and liquid assets along to bypass probate and the estate tax anyway but this makes it much easier. I haven't yet looked at the insidious barbs the government tends to put into the laws to hook you, though.

Anonymous (not verified)
on Jan 8, 2013

Fine by me.....the notion that the tax should be repealed altogether is fiscally irresponsible demagogued by those who mainly want to get their money out of the land...with no tax consequences. Will be certain to take the present position on the tax into account in my estate planning.

Blaine (not verified)
on Jan 8, 2013

Anonymous re: "the notion that the tax should be repealed altogether is fiscally irresponsible demagogued by those who mainly want to get their money out of the land...with no tax consequences."

Um, wow. I guess I am a little shocked by that statement, and I certainly do not understand your mindset unless I am misunderstanding (completely) your words. First of all, the Estate Tax is by far and away the most confiscatory tax that exists. You say "get your money out of the land," but what you should say is to get their money out of THEIR land. "THEIR's," not "the," not "others," and certainly not the "Government's land!" It is THEIR land, the land of a family that may have worked and owned an operation or farm for generations, only to have it confiscated because the matriarch or patriarch has died? America was founded on private ownership of land/property, and it should NEVER be seized by our government. What or how gave the government the thought that they could seize this land/property in the form of a 55% tax? Or a 40% tax? Or any TAX at all!!!! I completely disagree with your comment and if you are so inclined to give your "fair share" to a irresponsible government who refuses to reign in spending than go ahead and write the check, but leave your confiscatory paws and socialist mentality off from mine.

Of course, I understand that taxes must be raised in order to maintain our domestic security and infrastructure. We have a major spending problem in this country and until we correct that, we are in dire straights. This said, no tax that could potentially shut down a farm or ranch (or ANY business) in order to settle a tax bill that only kicks in once someone dies should be should be abolished immediately. People, YOU or YOUR family have worked and created and obtained and prospered in order to grow a business and chase the American dream. While doing this, YOU and YOUR family have employed, and purchased equipment fromother industries, and produced food for America and the world, and therefore contributed exponentially to bettering the human condition. The GOVERNMENT has NO right to take it, and should a family decide to sell off and leave ranching or farming or business instead of continuing to run it, that is up to them. We have lost our way in this country. I support 100% repeal of the Estate Tax and am 100% in favor of a fair income tax and an elevated National Sales Tax.

God Bless the United States of America. We need it.

Anonymous (not verified)
on Jan 10, 2013

Very well stated! Agree with every word in your reply!

Darcy (not verified)
on Jan 8, 2013

Blaine - Well said.

Anonymous (not verified)
on Jan 8, 2013

I read that the estate tax started at a 1% rate. While I think estate tax should be eliminated, at a small percentage it would at least be possible to pay it without selling the ranch. Private property rights are America's crumbling foundation.

W.E. (not verified)
on Jan 8, 2013

Most of us who have spent our entire adult lives working hard to manage our farms well, wish that we had some way to ensure that our heirs will stay on the land, work to preserve it, and know how to take care of it after we are gone. In our neighborhood, many farms were lost to farmers and their families during the decade of the 1930s to several different kinds of weather and financial disasters that accompanied the Great Depression. A big insurance company took over their ownership and made the farmers tenants on their own land, painting all of the weathered gray wooden barns red to make hard-luck farms ravaged by drought and flood look more prosperous and picturesque.
In subsequent years, some of the children of the Depression, both sons and daughters, went away to northern cities where they worked long hours in factories, earning enough money during and after World War II to buy back their parents' land and keep it in their families for another generation or two. These were diversified small farms, most of them from 40 acres up to 250. Their owners were self-disciplined people who had known great hardship and were willing to do almost any kind of work to remain on the land. As the land was paid off, they painted the red barns black to show they were now "in the black."
During the decades since then, as the children of the Depression grew old and died, we have seen far too much of their land mined and eroded away by the exploitations of absentee ownership, or passed along to widows who never had a hand in the day-to-day work and management of the farm, or to daughters whose husbands and children have no interest at all in the land.
We have seen small farms merged to make larger farmers, fencerows and orchards and woodlots bulldozed and burned in the name of progress to make way for larger and larger machines, requiring fewer and fewer farmers. Tree farms along streambanks, creek bottoms and whole forests that were carefully preserved and managed for two or three generations have been clear cut to fuel lumber yards and a paper mill, furnishing fast cash to buy fancy lake houses and an expensive car for a son and his wife who never visited their family's old place. We have seen hilly land that was carefully sown down and maintained as permanent pastureland sprayed down to grow corn and soybeans, now scarred with gullies twenty feet deep despite the use of no-till farming techniques.
In our opinion, the justice of an inheritance tax depends largely upon the integrity, character and stewardship of the inheritors. For that reason, it might be wise for family farmers to safeguard their land in trust for a while, especially if their offspring are young and inexperienced. Keeping farmland in the family works only if we can pass along to its inheritors a deep and abiding interest in it, a commitment to it, experience in its care, and lasting fidelity to preserve it for future generations.
When the inheritors have no interest in anything except the money it can generate, the land suffers mightily. The government has no right to take land from those families, but absentee owners who care nothing for it should have no right to lay it to waste, either. Maybe some special provision should be made to protect and accommodate those inheritors who also intend to remain on the land as its caretakers—an absentee owner tax or some such measure, which could help fund conservation efforts.

Blaine (not verified)
on Jan 8, 2013

W.E.,

I agree with you completely, and it is important to encourage that families remain involved in agriculture from generation to generation. I would only re-enforce that ultimately, that is their INDIVIDUAL choice. Although I am with you on keeping generational fand traditional farms and ranches in place, we can only hope and pray for that result.

I will state once again, though, that it is the individual American familes choice what ultimately becomes of its farm, ranch, or business. It should NEVER be the decision of the governments!

I love your characterizations and descriptions, too. Painted lovely, and sad, images in my minds eye. Thank you for that:)

God Bless the United States of America and Farmers and Ranchers everywhere.

Anonymous (not verified)
on Jan 10, 2013

Interesting idea. No taxes if heirs continue the ag use. Similar to an ag exemption. If you keep it in production, no death taxes. If you sell it for mining, housing developments, etc, then taxes come due.

Mathena (not verified)
on Jan 8, 2013

I'm with Blaine, why tax something that has been taxed to death already. My family farm has been around since 1834, and been paying taxes on it ever since, but then i'm supposed to pay another % of it because someone died. Welcome to the USSA!

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BEEF Daily Blog is produced by rancher Amanda Radke, one of the U.S. beef industry’s top social media “agvocates.”

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A fifth-generation rancher from Mitchell, SD, Amanda grew up on a purebred Limousin cattle operation in which she and husband Tyler are active. She graduated with a degree in agriculture journalism...

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