Estate planning a must for future
By JOYCE BUPP
York Co. Reporter
YORK, Pa. - Executor;
probate; testate; marital
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Estate planning is
becoming increasingly
important as a long - term
part of farm management.
New tax laws passed in 1976
have pushed estate planning
to the critical point.
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“Some farmers think the
new tax law did them a
favor. We’re here to tell you
it did not!” emphasized
Phillip H. Tarpley, an estate
planning specialist with
Farm Family Insurance, an
affiliate of the Pennsylvania
Farmers’ Association.
Tarpley and Joseph
Larkin, an attorney
specializing in farm estate
planning, met with members
of the York County Farmers’
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Association on February 24
at the Community Room in
the York Mall. About 100
farm men and women turned
out to hear the recom
mendations of the
specialists.
Tarpley emphasized that
farmers tend to feel that land
is and forever shall remain
theirs. However, when a land
- owner dies, attorneys and
the Internal Revenue Ser
vice disregard the farmer’s
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attachment to his land as
part of his life - they simply
look at land in terms of
taxable dollars.
Through properly written
estate plans and wills, a
farm family can avoid
paying literally thousands of
dollars in the various taxes
levied by the state and
federal governments.
By writing a will, a lan
downer can choose the
executor of his property,
thus avoiding having it
thrust into the hands of an
impartial bank or attorney
who may not care what
eventually happens to the
family farm. Guardians can
be named for children,
avoiding possible legal
proceedings for their care
and disposition.
Federal estate taxes begin
at 18 per cent of a net estate
and can run up as high as 70
per cent of die net estate
worth. Pennsylvania
charges a six per cent
inheritance tax, although
none is levied on estate
transfer to a spouse; neither
are probate taxes charged on
inheritances from a husband
or a wife.
A wife is allowed to inherit,
tax free, one-half of the
estate, or $250,000,
whichever amount is larger.
She will be taxed on the
remaining inheritance
valuation. When she dies,
children inheriting the entire
Lancaster F^ripingi.Saturday, March 5,1977 —
estate left by the mother will
pay taxes on the total
amount, even though the
mother originally paid taxes
on half of the estate after the
father’s death.
“How do we get around
that?” questioned the tax
specialists.
They recommend making
the most use of the marital
deduction, and then willing
the remaining estate to the
children after the father’s
death. The wife will not be
taxed on her marital
deduction inheritance, and
the children will pay the tax,
only once, on the remaining
amount going to them.
“This could save the
children up to $60,000 on a
$500,000 net estate set
tlement in the long run,”
advised the farm tax ex
perts. “By a few simple
words properly set down in a
will, thousands of dollars can
ultimately be saved.”
“What’s the best way to
pass my farm on to my
son?” is another key
question frequently raised
by farmers in estate plan
ning.
Estates are generally
taxed on their value at the
time of the father's death.
However, a son will have to
pay taxes on the capital
gains made on the property
value increases after the
father’s orginal purchase.
New tax legislation has
written into it a section
known as the “Special
Valuation Provision.” Both
Tarpley and Larkin question
the provision as being a
possible trap for land
inheritors.
“It’s the worst com
promise Congress could
have possibly come up
with,” flatly stated Atty.
Larkin.
Under the provision,
inherited land can be valued
for its usage, not necessarily
at its market price.
However, if the land is later
sold for top - dollar price,
within 15 years, the IRS will
recomputate the tax, based
on the market price, and add
the tax levy on to the selling
taxes. The clincher to the
provision, in the experts
point of view, is that legally a
mortgage cannot be taken
on the land by a lending
agency, because of this
“floating tax lien”
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possibility, which prevents
issuance of a clear title to the
property.
“Unless this is revised -
and soon - the young farmer
on the East Coast is done
for,” warned Larkin. “The
nice big bone they threw to
the fanners in the Tax
Reforms bill is useless.”
Because partnerships,
land agreements, and
loosely structured family
farming arrangements can
change rapidly under
unexpected human cir
cumstances, the specialists
advised “putting everything
down on paper.” Such
agreements should be tightly
drawn, businesslike and
properly written, or the
Internal Revenue Service
may not recognize it, if tax
questions arise.
“If you’re getting ready to
set up estate arrangement
s,” suggests Larkin, “Go to
your attorney and tell him
you’ve just died and that you
want to know how much in
taxes you’re going to have to
pay.
The two experts recom
mended seeking
knowledgeable specialists to
set up farm estate plans,
because many legal con
sultants just aren’t fully
advised on the unique farm
inheritance problems. They
both agreed that it is critical
to the future well - being of a
farmer’s family that he set
up an individualized plan
now - while he is still able.
“They’ll get you, sooner or
later. In estate planning, we
try to make it as late as
possible,” concluded Larkin.
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