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Estate Planning

Jan
22
2013

Changes to Federal & Ohio Estate Taxes will help Ohio Farm Families

By David L. Marrison, OSU Associate Professor One worry which was taken off the minds of many farm families was the threat of the federal estate tax reverting to a $1 million dollar exemption in 2013. This worry was eliminated with the estate tax provisions of the fiscal cliff legislation titled American Taxpayer Relief Act of 2012 in January 2013. Farmers now can breathe easier with respect to the federal estate tax. To top it off, the Ohio legislature had also voted to repeal the Ohio Estate tax beginning January 1, 2013. These article examines these changes and how they may impact Ohio farm families. Federal Estate Tax Changes The American Taxpayer Relief Act permanently sets the federal exemption for gifts and estates at $5 million instead of dropping to the aforementioned $1 million level. This amount will be indexed for inflation. The IRS has announced the 2013 limits will be $5,250,000 up from its 2011 level of $5,125,000. It should be noted that this legislation included the word “permanent.” This is significant as many fiscal agreements made by Congress since 2001 have contained a phase out date. The legislation also allows for portability or the transfer of the unused exemption of a deceased spouse to the surviving spouse. To gain this portability, the executor of an estate must properly file the deceased’s estate tax return within nine months. Once the filing is completed, the remaining exemption is transferred to the spouse of the deceased, who can...
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Estate Planning, February 2013
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Sep
11
2012

What If a Family Member Wants to Unexpectadly Exit the Family Farm Business?

By: Chris Zoller, OSU Extension Educator, ANR, Tuscarawas Country

Family businesses are complex, challenging, rewarding, and often gratifying.  Parents often desire their children to continue the business.  However, like some marriages, they don’t always work.  Finances, poor communications, personal goals, leadership styles, management philosophy, and life changes are but a few of the reasons these separations occur.

So, if you are faced with a situation such as this, what should you do?  In no particular order, below are a few items to consider in an attempt to minimize damage to the business and family structure. Legal Counsel – there is a great likelihood that legal advice will be needed in the process of dissolving the present business relationship and organizing a new structure.  It is recommended that the same attorney not represent all parties in a situation such as this.  It makes it difficult for the attorney to fairly representing each client.  An alternative to this is to enter into mediation, if all parties agree to do so. Financial Advice – hopefully, good financial records have been kept and accurately reflect the financial health of the business.  Good records allow for a thorough analysis of the business and can assist in evaluating potential alternatives.  How will the member who is exiting be compensated for his or her share of the business...
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August 2012, Estate Planning, Legal Issues, Newsletters
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Jul
09
2012

Estate Planning Fact Sheet Series Revised

Estate planning is a process not a onetime event because of continual changes in the farm business, family situation and state and federal laws.  Farmers need to schedule an annual check-up with their attorneys to make sure that the estate plans they have will still fulfill their stated objectives. OSU Extension has revised the Basic Estate Planning Fact Sheet series so the information is current for 2012. These revised factsheets have been published and are available at http://ohioline.osu.edu/ep-fact/index.html or you can click on the following links to read them.

 

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Estate Planning, July 2012
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Apr
03
2012

Elimination of Federal Estate Tax Bill Proposed in Congress

By David Marrison, Associate Professor Could the Federal government be following Ohio’s lead in eliminating the Federal Estate Tax or is this “Election Year” posturing? The federal estate tax is currently set at 35% on estates over $5.12 million. If nothing is changed on January 1, 2013 the estate tax exemption will drop from $5.12 million to $1 million and the estate tax rate will jump from 35% to 55%. In his 2013 budget proposal, President Obama is supporting a $3.5 million estate tax exemption and 45% estate tax rate. At the close of March 2012, Senator John Thune, Republican from South Dakota introduced the Death Tax Repeal Permanency Act S. 2242, which would permanently abolish the federal estate tax. This act would repeal the federal estate tax, repeal the federal generation-skipping transfer tax and lock in a $5 million lifetime gift tax exemption and 35% gift tax rate The Senate bill mirrors House Resolution 1259 which was introduced by House Representative Kevin Brady, a Republican from Texas. Many farm organizations have been advocating the repeal of the Federal Estate Tax due to its effect of these businesses being able to be transferred to the next generation. National Cattlemen’s Beef Association President J.D. Alexander stated in a recent press release, “The death tax is detrimental to the farmers and ranchers who live off the land and run asset-rich, cash poor family-owned small businesses.” According to a study by Douglas Holtz-Eakin...
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April 2012, Estate Planning, Farm Policy
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Mar
28
2012

Federal Estate Tax Exemption Limits Set To Drop in 2013

By David L. Marrison, Associate Professor At the end of 2010, President Obama signed “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” Most will remember that this bill extended many of the Bush era tax cuts. What many do not remember is that this legislation also made some significant changes to our federal estate tax laws. And quite frankly, this is the one area that concerns me the most when I think of the future of many of our farms across Ohio. The estates of every U.S. citizen are subject to the federal estate tax upon their death. However, a certain potion is exempt from the tax. In 2012, this exemption is $5.12 million. Therefore, in 2012 if the value of the net estate - meaning the gross estate reduced by allowable estate tax credits and deductions - does not exceed $5.12 million, then the estate will pass to the heirs free from federal estate taxes. Any amount above $5.12 million is subject to a 35% tax. The increase to a $5 million exemption was a welcomed relief as individuals developed their estate plans. The increase to the $5 million exemption is short lived as the increase only applies to 2011-2012. Congress must revisit the estate tax laws before the end of 2012, otherwise we will revert to pre 2001 exemption levels. This means that on January 1, 2013, the federal estate tax exemption will drop all the way down to $1 million and the estate tax rate will jump up to 55% (Ouch). This could affect hundre...
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April 2012, Estate Planning
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Jan
11
2012

Family Business Meetings–Helping Farms Communicate

by David Marrison

Tommorrow, I will be teaching at the Kentucky Cattlemen’s Convention about communication issues for farms in transition.  Poor family communications are at the center of many farm transition and estate transfer problems.  One way which farm families can improve communication is to hold family business meetings.  Chris Zoller of Ohio State University wrote a nice factsheet on tips for successful business meetings and it can be found at:

http://ohioline.osu.edu/bst-fact/pdf/3612.pdf

What other strategies have you found to improve family communication?


This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Jul
08
2011

“Transferring Your Farm Business Workshop to be held in Northeast Ohio”

By: David L. Marrison, Ag & NR Extension Educator Click here for the registration flyer As the age of farm operators increases, transferring the ownership and management of the family farm will become one of the most important issues farm families will face. This workshop has been designed to help farm families in Northeast Ohio plan for the transfer of their family farm. To help farm families plan for the future, OSU Extension will be hosting a Transferring Your Farm Business workshop on August 23, 2011 from 9:00 a.m. to 4:30 p.m. at the OSU Extension Office in Trumbull County located at 520 West Main Street in Cortland. This workshop will challenge you to actively plan for the future. Farm families are encouraged to bring members from each generation to this workshop. Kick off your estate planning discussion with the tools offered at this workshop. Learn from the estate transfer nightmares encountered by other farm families. This workshop is one which will help you develop a plan for the future, discover ways to increase family communication, and learn strategies for transferring management skills and the farm’s assets from one generation to the next. Some of the topics which will be addressed include: Getting the Family to Talk About Estate Planning, Getting Your Affairs in Order, How to Use Farm Business Arrangements in Estate Planning, Estate and Transfer Strategies, Providing Income for Multiple Generations, How Do I Treat Each Offspring Fairly Whe...
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Estate Planning, July 2011, Upcoming Events
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Jul
06
2011

Ohio estate tax will disappear in 2013

The Ohio legislature has approved a repeal of the Ohio estate tax, but the tax will remain in effect for another 18 months.  The new law removes the Ohio estate tax obligation for any person who dies on or after January 1, 2013.  Governor Kasich signed the provision into law on June 30, 2011 as part of the state’s budget package.  The final version of the repeal differed from the language proposed earlier this year in H.B. 3, which proposed ending the estate tax as of January 1, 2011 (see our earlier post).


This post is a reprint of a post by Peggy Hall that originally appeared at Ohio Agricultural Law Blog.
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Estate Planning, July 2011, Legal Issues
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Feb
02
2011

New Rules for Estate Taxes

by Jim Skeeles & Chris Bruynis, OSU Extension Educators

Congress passed new legislation in December affecting estate taxes, but only for 2011 and 2012, reducing federal taxation of large estates. This legislation affects families with an individual who dies in 2011 or 2012 and has assets more than one million ($1M) or an individual that gifts more than $1M dollars during this period.

With this law change, an individual can pass on a total of $5M worth of assets with no federal estate or gift tax due. Further, if the net worth of an individual’s estate combined with the total counted amount given exceeds $5M, the federal estate and/or gift tax rate has been reduced to 35%.

Also upon the death of the first spouse, the surviving spouse now receives the unused $5M exclusion of the deceased spouse. Since the surviving spouse also has her exclusion of $5M she now can transfer assets totaling $10M, either by giving them away, the assets going through her estate, or a combination of the two.

Since the federal estate tax and gift taxes are “unified”, the $5M exemption is for the combination of the value of the estate and total value of “counted” gifts over a lifetime. For instance, if the value of one’s estate is $5M and counted gifts of $1M were made over that person’s lifetime, for a total of $6M, then the amount over the exclusion, the $1M, would be taxed at 35%.

However, if the estate value is $1M with counted gifts being ano...
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This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Jan
25
2011

Ohio House introduces bill to repeal Ohio estate tax

This was posted on Peggy Hall’s AG Law Blog yesterday.  Good update

Ohio House introduces bill to repeal Ohio estate tax

Posted: 24 Jan 2011 02:13 PM PST

A bill introduced in the Ohio House of Representatives proposes a complete repeal of the Ohio estate tax.  Representatives Grossman and Hottinger introduced H.B. 3 on January 11, 2011. The bill is simple:  it amends the estate tax provisions currently in Ohio law to state that the tax provisions apply only to estates of persons who died before January 1, 2011. Regardless of when the bill would become effective, persons dying after January 1, 2011 would not be subject to the estate tax. The bill also removes the estate tax return filing requirement for estates of persons dying after the January 1, 2011 date.

The Ohio estate tax is a graduated tax on a person’s gross taxable estate, less deductions and exemptions.  An estate valued at less than $338,333 pays no tax due to credits and exemptions included in the law.  Estates between the value of $338,334 and $500,000 pay a 6% estate tax while estates over $500,000 in value owe a 7% estate tax.  The state receives 20% of the estate tax revenue and the local government of the decedent’s residence receives the remaining 80% of the tax.  Ohio is one of 17 states that have an estate tax.

How is agriculture affected by the Ohio estate tax?  It’s not uncommon for a farm estate to be valued at the taxable thresho...
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This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Jan
21
2011

Ohio State University Extension Can Help You Prepare for 2011

by Chris Zoller, Extension Educator, ANR Tuscarawas County
I can remember back several years ago on the first day of a junior high school math class. The teacher gave each student a piece of wood about the size and shape of a quarter. On each side of this wooden piece were the words to and it. He explained that he didn’t like hearing his students and others use the phrase, “I’ll do (you fill in the blank) when I get around to it.” So to solve this problem he gave each of us a “round to-it.” We’ve all used this phrase in our family and business settings because it’s easy to say and do. The start of a new year is often a good time to do those things you’ve been putting off and Ohio State University Extension has a number of resources to help get you moving. Tax Guides It’s that time of year to figure your income, expenses, and tax liabilities for the year. IRS Publication 225 Farmers Tax Guide is an excellent reference. It provides helpful information about filing taxes and updates about changes in tax laws that may impact you. Copies of this publication are available by contacting your local OSU Extension office. Farm Records Whether you use a paper or the Quicken software program to maintain your financial records, OSU Extension has resources to assist you. Several farmers have been in the office recently picking up new forms for the Ohio Commercial Account Book. Some have moved to a computerized software system. If you are thinking of trying Quicken, OSU Extension has developed a comprehensive manual to g...
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Estate Planning, February 2011, Financial Management
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Oct
08
2010

2010 Step Up in Basis

by Russell N. Cunningham, OSBA Certified Specialist in Estate Planning, Trust and Probate Law Barrett, Easterday, Cunningham & Eselgroth LLP
With the 2010 repeal of the federal estate tax, the rules for determining income tax basis on inherited property became more complicated for deaths occurring in 2010.  The income tax basis of a property is used for determining capital gains when an asset is sold and depreciation.  In prior years and in future years, the estate's basis in the property is the fair market value at date of death, regardless of whether this is an increase or decrease in the decedent's basis. The basis of inherited assets in 2010 will be determined by a complicated process beginning at the lesser of the decedent's basis in the property or the fair market value of the property on date of death.  Thus for some, the basis still may be decreased, particularly for stocks that have decreased in value.  For assets whose basis is still less than the fair market value, each estate of a U.S. citizen or resident has $1,300,000 of basis to add to the decedent's existing basis. If property passes to a surviving spouse either outright or in a qualified terminable interest, the estate has another $3,000,000 of basis that the executor may allocate.  The additional basis amount is increased by capital loss and net operating loss carryovers of the decedent and certain calculated losses.  For non-resident aliens, the executor only has $60,000 of basis to allocate.   The executor may not increase the basis of any asset to more than the fair market value of the property at date of death. For example, if a...
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Estate Planning, October 2010
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Jul
06
2010

International Farm Transition Network Conference Coming to Ohio

The International Farm Transition Network will host their annual conference July 20-23, 2010 at the Sheraton Suites in Cuyahoga Falls, OH. This three day meeting will bring together agricultural professionals, farmers, citizens, and service providers to discuss and learn about exciting projects in farm transition. During the conference, participants will hear panel discussions on farm labor, beginning farmer and farm succession research, and farm policy, and listen to interns, apprentices, and retiring farmers discuss their needs related to farm transition. Registration is still open! For registration, agenda, and more information, please visit: http://www.cvcountryside.org/farmland/IFTNConference.php
This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Feb
16
2010

AgTransitions Web Site Helps Farms in Transition

I received an email from the University of Minnesota’s  Center for Farm Financial Management which has developed a web site called AgTransitions.  This web site provides a means for farm and ranch families to develop a written transition plan on the web. I encourage you to check it out! 

AgTransitions is located at https://www.agtransitions.umn.edu

AgTransitions provides users with a built in “curriculum” in the form of an outline for sections that might be included in a plan, tips for each section, web resources, and worksheets. Most importantly, it allows family members to communicate with each other and outside reviewers as they develop their plan. AgTransitions is not intended to replace farm succession planning workshops. Rather, it provides a means for producers to put what they have learned into action while allowing professionals to follow-up on their progress.  A great introductory video is included on the home page.


This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Feb
08
2010

Planning for the Succession of your Family Business

As the age of farm operators increases, transferring the ownership and management of the family business to the next generation will become one of the most important issues farm families will face. While many farmers dream of seeing their legacy passed onto the next generation, many postpone initiating a plan for the transition of their business for a variety of reasons. Many claim  there is not enough “time” to discuss these matters. Or if planning does occur, it simply involves the senior generation drafting a will describing how the farm assets should be divided among heirs.

To help farm families plan for the future, OSU Extension will be hosting a Transferring Your Family Business to the Next Generation workshops across Ohio in March.  These workshops will help answer the questions that often arise when planning for the future: Who will manage the business in the future? How much money will I need to make it through retirement? How do I treat each offspring fairly when it comes to dividing up our farm? How will I know if my kids are ready to take over the farm? What are the legal hoops that need to be jumped through to pass the farm on without hurting the financial standing of the farm? How can we plan so the farm will be profitable for multiple generations? Is there enough equity in the farm that I can retire without selling out?  These workshops will help you develop a plan for the future, discover ways to increase family communication, make pla...
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This post is a reprint of a post by marrison.2 that originally appeared at OSU Extension Farm Succession Blog.
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Keith L. Smith, Ph.D., Associate Vice President for Agricultural Administration and Director, Ohio State University Extension TDD No. 800-589-8292 ( Ohio only) or 614-292-1868