Louisville, Ky (PRWEB) December 13, 2012
The issue of succession planning has been elevated as a result of the ‘Fiscal Cliff,’ a term used to describe the potential negative impact on the economy as tax breaks expire. Unless Congress takes action by the end of the year, the taxes on estates will be the same as the levels that were set more than a decade ago.
Under the law today, on January 1, 2013, the estate tax exemption would decrease from more than $5 million to $1 million and the top rate would jump from 35 percent to 55 percent. It’s estimated that 1 in 10 farm families would be negatively impacted by this change in estate tax law.
“Because farmers typically invest most of their earnings toward increasing and improving farm real estate and not in liquid assets, not having a solid succession plan means that the next generation is often faced with selling land and assets in order to meet tax obligations,” says Natasha Cox, Farm Credit Mid-America.
Couple the expiring tax laws with the fact that almost 50 percent of farmers are less than 10 years away from retirement, it becomes especially important for farmers to think about how today’s business plans play into a successful succession plan.
“Good succession plans provide farm families with clarity and security in the midst of policy and operational changes,” Cox says. “A solid plan sets expectations for the next generation and provides ample time for planning and training.”
Cox outlines several important steps to succession planning:
Engage your spouse and beneficiaries by opening up the lines of communication. Find out what is important to them and what their goals and objectives are for the operation moving forward. Purdue University sponsors a next generation workshop that will help you identify goals and objectives for the famiy farm – Farming into the Next Generation Workshop.
Identify your succession planning committee – this can include tax accountants, attorneys and possibly investment advisors.
Engage your lender, who can provide holistic knowledge of your operation and help anticipate future financial issues.
Farmers need to think about protecting themselves and their families. Having a solid succession plan is one way to assure the next generation will enjoy the farm’s legacy and way of life.
About Farm Credit Mid-America
Farm Credit Services of Mid-America is an $19 billion financial services cooperative serving more than 92,500 farmers, agribusinesses and rural residents in Indiana, Ohio, Kentucky and Tennessee. The association provides loans for all farm and rural living purposes including real estate, operating loans,equipment loans, and housing loans. FCS also provides an array of financial services, including crop insurance and leases. For more information about Farm Credit, call 1-800-444-FARM or visit them on the web at http://www.e-farmcredit.com.