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Estate planning for Texas farm owners

The estates of Texas farmers may be affected by federal estate taxes upon the death of the estate owner. Therefore, it is important that farmers take potential liabilities into account during the estate planning process. If an individual passes away in 2014, private estates that are less than $5.34 million will not be subjected to federal estate taxes; however, for farmers, a different estate valuation system may apply.

Small business and agricultural estates that include real estate property (in addition to other qualifying factors) may be subjected to special use valuation. What this means is that, if the real estate is being used for a business and will continue to be used as such, the property may be valued on how much profit it creates as opposed to its real estate value. Estates that include a family farm, for example, could effectively lower their federal estate tax liabilities by employing this special use valuation system — the details of which can be found under IRS Code Section 2032A.

Texas farmers may feel overwhelmed by the different tax codes that could apply to their estate. However, when dealing with a tax planning and estate planning professional, the most important thing to keep in mind is one’s goals. Ultimately, for a professional, the details of estate planning are simple, but they do need to be directed in terms of the individual’s goals for their estate. For example, will the farm be inherited by one family member or shared equally among several children?

Ultimately, estate planning can be considered as a process of teamwork. Legal professionals, accountants and other kinds of financial advisors may all play a role in the construction of the estate plan. Some Texas farm owners may also wish to discuss their plans with their family members in order to determine if they are interested in carrying on the family business. Indeed, in many cases, potential heirs of a farm or other kind of business may be busy in different careers, and they may not have the time or the ability to manage such an undertaking.

Source:, Plan Your Estate, Darrell Dunteman, March 22, 2014