What is in this article?:
- Donâ€™t bet your farm: An estate plan can help preserve assets
- Internatinal buyers pushing up values
- Consider family differences
You may not think you have an estate large enough to worry about, but with today’s land prices and the value of equipment, storage bins, and other assets, it quickly adds up.
Consider family differences
Squabbles within a family can also be the source of problems, Gillentine says, citing a family that bought a beach vacation home in Florida 50 years ago.
“Over the decades, it was damaged or destroyed by hurricanes several times, and was rebuilt, each time larger and better, and was now worth $ $2 million. There were several heirs, some of whom didn’t like each other, one in poor health, one who wanted to sell and have his share now, and two who wanted to keep the property, but didn’t have the money to buy out the others.
“Their options, in a depressed housing market, were selling now for $1 million or the two people who wanted to keep the house coming up with $500,000 each. Any way it went, nobody would win.
“Do some planning before it comes to this. If you know your kids aren’t getting along, look the situation in the eye and deal with it in advance — or I can promise you Thanksgivings and Christmases aren’t going to be much fun at your house.”
No matter how you look at taxes, no matter where you are on the socio-economic scale, Gillentine says, “It’s very rare these days that you can do your taxes yourself or go to the corner tax preparation office and get them done. Most farms are big business, and you need good tax advice.
“Find somebody you trust, who knows taxes and is good at tax advice. The tax code is now over 70,000 pages and these professionals can be invaluable in helping you do what’s needed to comply with the rules.
“Find a CPA who’s good at what they do and is good at knowing what you do. Good intentions don’t work with the IRS — if you make a mistake, you still will face penalties and taxes, and some people even go to jail.
“Don’t be intimidated by the IRS — but respect the IRS. You may not understand the tax code, but as long as you understand what you spend money for in your farm/business, and how it can flow through the tax code, and you play by the rules, you’re going to be OK.
“But you need a tax advisor who will do two things: Inform you every year of the new tax laws and then explain how they will apply to your business. He or she should be willing to talk with you, answer your questions, and be a team member.”
Trusted advisors can also be bankers, Gillentine says. “I’ve worked with big banks, little banks, all kinds of banks — those that have weathered the banking crisis and are still standing are often relational banks. They may not always have the lowest interest rates, but they go out of their way to help their clients and provide service. If you’ve got one of these relational bankers, stick with them. When another banking bubble comes along, they’re the kind of people you want to be associated with.”
Gillentine says a lot of people get caught up in the idea of saving on taxes and will spend a lot of money just to get a deduction.
“I know professionals who will spend $85,000 on a tricked-out Cadillac Escalade just because they can get a $35,000 business tax deduction. Don’t ever let the tax tail wag the dog. Does it really make good business sense to spend $50,000 just to get a $35,000 tax deduction?”
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