It is just too easy to say the estate tax only affects the wealthy. 3.5 million dollars isn’t as much as you think. What if your parents had a 1,000 acre farm? In my state an acre of land is valued at 3,700 dollars an acre. Suddenly or not so suddenly your parents die, leaving you an estate worth easily $4 million. Want to keep farming? Try coming up with 250k first.
I had an opportunity to talk with an estate attorney not long ago (not for myself), who told me that in some states an acre of agricultural land is worth $5,000 an acre. I think when people talk about estates and the estate tax, often they don’t consider farms or what are called “closely held businesses.”
People who do know about it or should know, our representatives in congress, sometimes try to fix this problem by various means, including carving out exemptions for those above situations, or by having the estate tax means tested: for example, no estate tax unless your income is above $250,000 a year, or something like that.
A couple people mentioned trusts. Yes, people can do estate planning, but the lawyer I spoke with said a trust can cost $50,000 easily.
Are you wealthy if you have 1,000 acres to farm? Probably not. Further, if the estate tax had reverted to $1 million exclusion and a 55 percent rate, even very small farmers would get caught for an estate tax. I know by acquaintance a family that owns probably about 500 acres of land.
Their dad is retired but still lives there. They farm corn and soybeans, plus have a small apple orchard. They are just getting by as far as I can tell. They sell honey out of their house from a few bee colonies they keep. Under the old rules even they could get hit with an estate tax.
Someone mentioned on a wall somewhere that people inheriting an estate should have to pay just as if they’d won the lottery, but for farmers that doesn’t really fit, unless it makes no difference to you whether the farmer continues to farm or just liquidates his property for cash.
The current fix on the estate tax is for two years only. It would be nice if they would come up with a permanent fix, but I suspect they don’t because it is just a good source of revenue.