Experienced Farm Insurance Agents Understand the Problems Estate Taxes Can Cause

I know you think estate taxes are a thing of the past, especially for someone like you whose farm business is small and who could take advantage of the transfer at death of your entire estate to your spouse.I also know that if you are fifty years old or older you have seen such swings in estate and income tax policies that you know for sure - just because they are the way they are today, doesn't mean that's the way they'll be when your family will have to pay them.

By the time you finish reading this article the Congress will have changed yet another law, repealed some and created others - some which will impact you this year and some you'll encounter next.And some you won't be impacted by for years to come.The question you will have to answer for yourself, maybe along with the insights of your farm insurance agent and other trusted advisors - is whether you want to be ready for those changes when they happen or if you want to do nothing today and hope for the best later.

Here's a little flashback, and maybe flash forward.When you die the IRS will establish a value for your farm business and they'll compare their figure with those on your estate tax return.Remember, that may or may not be important today - or when you read this for the first time, but you're not dead yet.

So it really doesn't matter now.Later however your executor may be dealing with the IRS and they will, naturally, have conflicting goals.Your executors will want to press on with how hard up you were and how little the land is worth, really.They will do whatever they can to keep your estate values low.

If you have been around long enough you have earned 12% on your CDs, you've seen fifty percent tax rates, and paid less than a dollar for a gallon of gas.Who knows what the estate tax situation will be when your estate is probated.

And if it is long enough into the future the value of the land may exceed anything you can imagine today.If you are able to pass it along to you widow without taxes being due - just imagine what they will do to her, or to your heirs - when she dies later on down the road.

The reason the IRS wants a high valuation is obvious.It will create the possibility of more taxes then or in the future.Whether we like the idea or not the IRS will be around long after we're gone.It is fair the speculate that we'll either pay them now or later, and they will work at creating the highest taxable estate possible for that eventuality.

In the old days when the IRS and executor disagreed matters often ended up in tax court for two or three or more years.During that time, regardless who the court agreed with, the estate ran up legal bills and the assets of the farm we tied up all the while.

If there was something you could do today that would avoid this potentiality, years even decades in the future - would you do it?If not then you are probably too naive to see your farm succeed for the long term anyway.

On the other hand if you are smart enough to want to stay in as much control of your farm's future as possible, you can solve the problems that happen to the well meaning farmers whose lawyers and accountants say, "don't worry about it" - hey it's not their farm.It's yours and if you don't worry about it who will?

Simply put, a well drafted buy-sell agreement solves the problems that may occur in the future by establishing a value for the farm business which is binding on the IRS for estate valuation purposes.If the agreement sets a fair price and you are obligated to sell both during your life and at death - the IRS will not be able to value the farm at a higher figure.

The agreement will also eliminate the delays and expenses which come with resolving a valuation dispute in tax court as well.No matter what the estate tax situation is today (the day you are reading this article) it is likely to be different on the day of your death.Do you want to do nothing and hope for the best, hope the IRS will not change its rules?Or do you want to get on top of the situation now and stay there?

Your buy-sell agreement also guarantees a fair price to your family which will make sure they receive value for your years of hard work.And it will allow the farm to continue on unencumbered in the hands of others based on decisions made by you when you are in your strongest bargaining position.

There are many other reasons for having a buy-sell agreement, whether you are in business alone or with partners.And there are people who will help you make the right decisions about the need and type of buy-sell agreement, and do so probably at no cost to you.

Farm insurance agents are unique among your other professional advisors.Generally they do their work on your behalf at no charge, relying on the commissions paid by the insurance companies they represent.In other words they get paid when you take action.

If you do nothing after their explanations, consultations, examples, and illustrations - farm insurance agents do not earn anything.That is their contract with you and the companies they represent.You will always get their best efforts on your behalf and the insurance company is paying for it.

About the Author

Successful farmers understand that concentrating on the immediate short term decisions that add to their profits , and that require countless hours of their time, should not take all of their energy, They understand that the valuable insights of their farm insurance agents can help them focus on what is important to them, their family, and the farm - for years to come.

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Concerning the Originator

Peter Kenny has been lettering monetary articles for 10 existence and is a author for The Thrifty Scot, suit discuss with us at

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