Legacy Planning Using a Farm or Ranch – Part 1

There are significant financial, tax, and estate planning advantages for families who make legacy gifts using farmland or ranchland. Given that the value of land has increased significantly over the past several years, many families have significant net worth. As these families move toward retirement, they often find it necessary to sell part or the entire farm or ranch to generate retirement income.
Legacy planning can be a great component of any family’s plan to sell the farm or ranch. They can offset the potential capital gains tax liability that selling would produce. In addition, they can achieve their personal, financial, estate, and charitable planning goals.
Farms or ranches often include highly appreciated assets with a low cost basis that would produce a large capital gain if sold. Because of the increased income and capital gains tax rates resulting from the American Taxpayer Relief Act, many taxpayers who would have otherwise paid taxes at lower rates in the past will now be subject to the top federal capital gains rate of 23.8% and income tax rate of 39.6%. Also, there will be state income and capital gains taxes.
Therefore, a family contemplating retirement may benefit from a plan with charitable components. Adding charitable components to a family’s retirement and estate plan may avoid the negative effects of taxes normally associated with an outright sale of the farm.
During the next three issues, we will discuss three different planning opportunities that will enable families to achieve their goals. If you are interested in exploring the various opportunities, please contact David Battles, CPA, at 800-259-6863 or dbattles@okumf.org . There is no obligation, and all inquiries are confidential.
The Oklahoma United Methodist Foundation
4201 N Classen boulevard, Oklahoma City, OK 73118-2400 | www.okumf.org • 800-259-6863