Skip to comments.They Are Going To Make It Nearly Impossible To Pass On A Farm Or A Business To Your Children
Posted on 11/21/2012 9:39:04 AM PST by blam
They Are Going To Make It Nearly Impossible To Pass On A Farm Or A Business To Your Children
By Michael Snyder
on November 20th, 2012
If you have a farm or a small business, would you like to pass it on to your children when you die? Well, unless Congress does something, it is going to become much, much harder to do that starting next year. Right now, there is a 5 million dollar estate tax exemption and anything above that is taxed at 35 percent. But on January 1st, the exemption will go down to 1 million dollars and the tax rate will go up to 55 percent. A lot of liberals are very excited about this, because they believe that the government will be soaking wealthy people like Warren Buffett and Bill Gates. But the truth is that a lot of farms, ranches and small businesses will be absolutely devastated by this change in the tax law. There are many farmers and ranchers out there today that do not make much money but are sitting on tracts of land that are worth millions of dollars.
According to the American Farm Bureau, approximately 97 percent of all farms and ranches in the United States would be subject to the estate tax if the exemption was reduced to just a million dollars. That means that the children of these farmers and ranchers would be faced with a very cruel choice when it is time to inherit these farms and ranches. Either they come up with enough money to pay the government about half of what the farm or ranch is worth, or they sell the farm or ranch that may have been in their family for generations. Needless to say, most farm and ranch families do not have that kind of cash lying around. Most of them are just barely making it from year to year. So this change in the tax law is going to greatly accelerate the death of the family farm in America. This is also going to devastate many family-owned small businesses. Many small businesses don't make much money, but they have buildings or land or assets worth millions of dollars. Children that may have wanted to continue the family legacy will be forced to sell because of the massive tax bill that they get from Uncle Sam. This is an insidious cruelty, and it shows just how broken our system has become.
The desire to leave the wealth that you have worked so hard to accumulate all your life to your children is something that is common to virtually all human societies. We want to know that future generations will be taken care of.
It is simply immoral for the federal government to swoop in and tax farms, ranches and small businesses that were intended to be passed down from parents to their children at a 55 percent tax rate.
A lot of the people that are going to be affected by this change are not "wealthy" at all. A recent Fox News report examined what this change in the law is going to mean for rancher Kevin Kester and his family...
Rancher Kevin Kester works dawn to dusk, drives a 12-year-old pick-up truck and earns less than a typical bureaucrat in Washington D.C., yet the federal government considers him rich enough to pay the estate tax -- also known as the "death tax." Kester told Fox News that he has no doubt that his ranch will have to be sold when he dies just to pay the tax bill...
"There is no way financially my kids can pay what the IRS is going to demand from them nine months after death and keep this ranch intact for their generation and future generations," said Kester, of the Bear Valley Ranch in Central California.
Two decades ago, Kester paid the IRS $2 million when he inherited a 22,000-acre cattle ranch from his grandfather. Come January, the tax burden on his children will be more than $13 million. Reading that should make you angry. Every single year, thousands upon thousands of farms, ranches and small businesses are going to be lost to the federal tax monster.
It is almost as if the federal government does not want income-producing assets to remain in the hands of the "little guy".
What in the world are we supposed to do?
It isn't as if all of those farmers and ranchers can go off to the big cities and find good jobs. As I wrote about yesterday, our politicians are standing aside as millions of our good jobs are shipped out of the country.
The cold, hard truth is that our system does not work for average Americans any longer. Those that roll out of bed every morning, work hard and never complain always seem to get the short end of the stick.
The people that are the backbone of America are the ones that the government is always the hardest on.
Unfortunately, we have gotten to a point where the government is searching for more "revenue" from anywhere it can because it desperately needs more money. U.S. government finances are a complete and total mess and we are drowning in the biggest ocean of debt the world has ever seen.
We are more than 16 trillion dollars in debt and there are more than 100 million Americans that are enrolled in at least one welfare program.
Someday has to pay for all this.
Middle class Americans are already hit with dozens of different taxes each year, and you can be certain that our politicians will continue to invent ways to extract even more "revenue" out of us.
And of course our politicians will never stop their wild spending. Despite all of the negotiations that have taken place over the past couple of years, our spending problems just continue to grow. For example, the federal budget deficit for the month of October was $120 billion, which was more than 20 percent larger than the federal budget deficit for October 2011 was.
So what is the solution?
Well, Treasury Secretary Timothy Geithner now says that he wants to eliminate the debt ceiling entirely. He says that we should just have no limit and that the federal government should just be able to go into debt as much as it wants.
In the end, all of this debt is going to absolutely crush us. We have literally destroyed the future of America, and yet most of the country still seems clueless about all of this. The blind are leading the blind, and we are headed straight for complete and utter disaster.
One day, when people look back on this period in American history, what do you think people are going to say about us?
Part of UN Agenda-21. Can’t wait for them to apply tax to the empty rooms in your house.
Every empty room in your house could collect rent so .gov will assign a value to it then tax you on what you should be making in rent.
They want to make it too expensive to own property. This will drive everyone to live in “mixed use” developments where you can be better accounted for and controlled.
Welcome to the future
Don't leave out their owning of the CONgress.
The John Birch Society has been raising the alarm about Agenda-21 for at least 20 years.
Seems to be a hot topic now.
My thought for our sons is to have a lease/purchase deal. You could gift them back the non-taxable amount that you can give each year.
Is there anything against the law with selling it to them cheap, under the going price?
A business entity like an LLC is perpetual, and you just change out the management of it. This change of management can be written into the articles of incorporation.
So, the parents manage the LLC which owns the property,
then upon death, management passes on to the inheritors.
It’s not that hard to set it up, but I’m sure if too many start doing it, depriving the gov’t of its “due”, they’ll find a way to keep the common folk from doing it.
If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may participate in FHA's Home Equity Conversion Mortgage (HECM) program. The HECM is FHA's reverse mortgage program that enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both...
These folks need to get educated on and start setting their properties up in trusts. Trusts are how the elites manage and keep their wealth within their family lineages.
I do not know all the specifics but by the time my grandparents both passed, they had signed over all properties and accounts to their only child, my mother. I remember hearing that it had to be in her name for seven (I think it was seven) years or the government would still try and take a cut under the argument that the assets were trying to be hidden from them, but after seven years they no longer had a case. It worked out well for our family and my parents have occasionally mentioned that they have learned a lot from the experience and also have a plan to securely pass property to my sister and I down the road. But we aren’t even close to that time yet, thank God. Like you suggested Jayster, the trick is just to stay way out in front of it with a good plan.
I am an attorney in Minnesota. There are some techniques you can undertake to try to pass wealth along, but those techniques only partially offset the pain. A plan for a large estate (greater than $10 million) needs to be implemented well in advance of death in order to take advantage of the planning techniques that are still available. If you are dealing with a very significant estate (not that $10 million isn’t very significant), the owner really needs to hustle, be aggressive, and stay on top of the changes that occur.
In Minnesota, we also have a state Death Tax that kicks in at $1.0 million. That impacts a WHOLE lot of people - many who don’t even realize they’re in that camp. (401k, real estate, life insurance, vehicles, etc — it adds up pretty quickly)
There is still the ability to gift to charity an unlimited amount - if it comes down to the government taking it or a charity receiving it... well, I know which one would end up with mine!
For the record, selling it prior to death would likely trigger crippling capital gains taxes - or gift taxes if the property was sold for less than fair market value. Then you have to figure out a plan for the cash... Passing it to the heirs (along with a stepped-up cost basis) would likely be much more prudent.
You have to watch out for a trust, though, especially if it’s managed by a bank or management company.
Their goal, more times than not, is to drain it as fast as possible and get it off their books.
But doesn’t the estate still have to pay taxes?
Well, young people voted for all this. They’ll be shocked by their structured poverty and oppression when they get older.
Commies will pile their oppression high and harden it by transfering power to the UN.
We set our parents’ up differently, and for different reasons. They weren’t the owners, and some of us kids managed it.
The problem is that they didn’t understand how it worked, and we got a lot of resistance after all the paperwork was signed.
So, set yours up while you’re still cognizant.
I wonder how many farmers voted for Zer0 and his fellow DemonRAT legislatures? This rule will hit them and they will still be in denial.
Despite claims otherwise, the Left is also hostile towards small business owners. Note the Occupy zombies smashing windows of small privately owned businesses. When told that the owners of the businesses were not part of the “one percenters”, the reply was the owners had more than most other “99 percenters”. This is the same reasoning that Stalin used on the kulaks.
The Democratic Party is the operational wing of CPUSA.
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