The good news is that the value of farmland in Illinois is increasing. The bad news is that the estate tax exemption is easier to surpass, and families owe more on their land if the farm owner passes away. The Illinois Farm Bureau (IFB) wants the state estate tax exemption raised to match the increase in land value. Therefore, the IFB new proposal would mean the heirs may be able to keep the farm for the next generation.
An estate tax is a tax due on the value of the estate of a deceased person. It’s also referred to as the ‘death tax.’ And there is a separate federal and Illinois estate tax. Let’s say you are a farmer and die without an estate plan. The tax owed on your farm might be so high that your family has to sell the land just to pay the taxes. While the value of the land has increased, most farm families don’t have enough cash on hand to pay the taxes.
An estate tax exemption is how much the estate can be worth before the taxes take effect. The current Illinois estate tax exemption is $4 million. If your estate is worth $3 million, your heirs do not have to pay the estate tax; but a running farm is rarely worth less than $4 million. The current Illinois state estate tax rate is 12% – 16%. If your farm is valued at $5 million, your family can owe $600,000 in state estate sales tax before anything can be distributed to the heirs.
According to Farm Week Now.com, the Illinois Farm Bureau is asking the state to change the tax-exempt amount to better reflect the federal tax and keep the rate with the rising land value. The IFB new proposal asks for the exempt rate to be $12.06 million. This, they say, is comparable to the federal 2022 amount. If you pass away and your farm estate is valued at $10 million, the farm could stay in the family and still produce food for our country instead of being sold to pay taxes.
Whether the estate exempt rates are increased or not, establishing an estate plan is one of the best ways to protect your family after you’re gone. And working with an experienced estate planning attorney will help you with an estate plan that is unique to you.
You probably have many questions when setting up estate planning with a family farm. Our experienced estate and probate attorneys can advise you on the best options to protect your assets and loved ones. Contact the Estate & Probate Legal Group at 630-864-5835 to talk to an attorney.
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