So you’re going along and you may or may not have your estate plan figured out, but at least the federal estate tax limit is at $11.58 million per person and that is portable, meaning that as a couple you have over $23 million of exclusion. Your thought process may be that you are under that limit, so you don’t even have to worry about that anymore! Plus, you have an added value knowing a surviving spouse or the next generation is going to get a stepped-up basis on those assets, so they can be sold for no tax or re-depreciated. Life is so good! You can just focus on your distribution plan, not estate taxes! Well, Will Rogers once said, "Even if you’re on the right track, you’ll get run over if you just sit there."

So here we are in a big election year with so much at stake, and yet there is diffusion and confusion like never before. There is the ongoing information, and misinformation, about the coronavirus; there are riots going on; some people are not working and are waiting for another government check; trade deals are in question; we don’t know if and when kids will be in school this fall; we don’t know the schedule for sporting events and there are restrictions on going to church. All these distractions remind me of the story of the Wolf and the Chicken. The chicken was lost, and the wolf sounded friendly by inviting the chicken over for dinner, but the chicken did not understand that he was the wolf’s dinner.

So, what is the right answer regarding estate tax planning? Is the answer just to sit on the track because we have an $11.58 million limit that isn’t supposed to sunset until Jan. 1, 2026? You can wait 5 more years, right? Well, that very likely depends on who gets elected as president in a few months. There have been several times in recent memory where the estate tax limit was supposed to sunset, possibly back to $5 million or $1 million. It didn’t happen. Yet some people made major gifts and paid for a significant amount of estate planning to avoid that potential 40% tax. Now here we are again. However, this time, no one is thinking about it because the “sunset” is five years away. But wait, could something drastic happen only a few months from now?

If President Donald Trump gets reelected, there’s a pretty good chance the current estate tax law and stepped up basis will stay in effect. However, if former Vice President Joe Biden gets elected, things could change in many ways, including a change in the estate tax laws sooner rather than later. Maybe estate tax limits will be the least of your concerns at that point, but those changes could include reducing the federal estate tax limit back to $5 million or less shortly after the election.

There have also been indications that Biden plans to increase corporate tax rates and get rid of stepped-up basis, which has long been very helpful to farm families. As a result, farm families may be looking at capital gains tax or recapture tax. Ironically, a capital gains tax on land may "slow down" a nonfarming heir from selling land, but in general stepped-up basis is very helpful to farm families.

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In regard to estate taxes and farm transitions, it is very important to have a plan and to be on the right track, but it is also important not to be someone else’s dinner.

Myron Friesen is the co-owner of Farm Financial Strategies Inc. in Osage, Iowa. He can be contacted at 866-524-3636 or friesen@farmestate.com.