A tax specialist presented strategies to help farm business owners lower their income and estate taxes at a workshop at the American Farm Bureau Federation’s 96th Annual Convention and IDEAg Trade Show. Kevin Bearley, principal of Kennedy and Coe LLC, offered guidance to farmers and ranchers looking to retain their legacy, even if they do not expect to pass their farm business on to the next generation. With 70 percent of U.S. farmland expected to change hands in the next 20 years, he said, it’s important for farm businesses to build into the next generation and create a greater sense of ownership of the land and business.
Estate planning is not about getting out of taxes, but it is about getting assets to the next generation, Bearley noted. “The main reason people lose the family farm at the next generation is because they don’t have a plan in place or they haven’t communicated their plan properly,” he said. Since estate tax law is not permanent and can’t be predicted, Bearley emphasized that it’s key to take advantage of planning tools that give owners flexibility for the future. Investment vehicles, such as IDITs and LLCs, let small business owners retain control of their assets during their lifetime.
Bearley also discussed income tax deferral strategies that give small business owners the freedom to invest more of their income. Although important tax incentives have not been made permanent by Congress yet, he said a solid knowledge of the tax code can help small business owners make smart decisions for building and investing in their businesses.