Planning for the worst 

Who’s afraid of the death tax?

Nobody likes to talk about death, especially those whose livelihoods revolve around the life cycles of cattle and crops. But as Benjamin Franklin succinctly put it: “In this world nothing is certain but death and taxes.”

“Death” and “taxes” are dirty words to a lot of people, and when the conversation turns to the so-called “death tax,” hackles get raised in a hurry. Critics of the federal estate tax say it’s immoral and un-American and hurts family farms and small businesses.

But how many Montana families have actually had to sell the farm in order to pay “death taxes?”

None, says Dr. Marsha Goetting, professor and family-economics specialist at Montana State University’s Depart-ment of Agriculture and Economics.

“You hear a lot of that kind of talk, but when you try to find specific examples, there just aren’t any,” says Goetting.

Goetting specializes in estate planning for farm families, and she’ll be the guest speaker at the Farm and Ranch Estate Planning Workshop at the Corvallis Grange Hall on Thursday, Dec. 1. The workshop is intended to dispel some of the myths about the federal estate tax, as well as to encourage Bitterroot ranchers and farmers to take a serious look at their estate planning. According to Goetting, seven out of 10 Americans die without a will, resulting in a raft of problems that could be solved by careful estate planning.

“There’s almost a stick-the-head-in-the-sand approach,” says Goetting. “It’s dealing with death, and who wants to think about dying?”

The federal estate tax currently allows for a $1.5 million exemption on the estate of a single parent. A husband and wife can leave an estate valued at up to $3 million to their heirs tax-free. Come January, the exemptions jump to $2 million for a single parent and $4 million for a couple. Goetting says estate planning can reduce the amount of taxes levied on estates even further.

Estate planning is becoming an increasingly important issue in Montana’s western valleys as population and property values continue to rise. As property values go up, many farm families find themselves in a higher tax bracket. That has farmers and ranchers concerned about what will happen to their farms—and their families—when they die.

“We know that estate planning is a mixed bag with families,” says Rob Johnson of the Ravalli County Extension Office. Johnson says many ranchers and farmers are beginning to realize how much money is involved. “This workshop is in response to development we’re seeing in the Bitterroot.”

In her travels around the state, Goetting often asks workshop participants what percentage of Montana estates were federally taxed in the previous year. People guess anywhere from 40 to 100 percent, she says.

“The truth is, of all the estates of people that died in Montana, only 2 percent paid a federal estate tax,” says Goetting.

In 2002, there were 8,481 deaths in the state. Of those deaths, only 170 decedents paid a federal estate tax. And that’s about on par with the rest of the nation, says Goetting.

So why all the political fuss over the “death tax?”

Because some very rich people with some very powerful friends in Washington don’t want to have to pay up, says Dr. Neil Harl, professor of agricultural economics at Iowa State University and one of the country’s leading agricultural finance experts.

“When you look at the data, the impact [of the estate tax] is the greatest for those who have more than $20 million in assets,” says Harl. “Those are the people who are buying up big swaths of North and South Dakota, Montana [and] Wyoming. Those are the Ted Turners of the world. The number of ranches and farms that are affected where the decedents are running a family-type operation—and not a huge land-ownership venture—is really very small.”

If the current estate tax law stays in effect, by 2009 only 0.05 percent of estates will face the tax in Montana, says Goetting.

But those in favor of repealing the federal estate tax have done a good job of spinning it as a death tax that affects Middle America’s farmers and entrepreneurs.

“The death tax is bad for rural America and Congress needs to make it extinct forever,” George W. Bush said in Iowa last April.

Rep. Denny Rehberg, R-Mont., had this to say after the House voted to repeal the estate tax in 2003: “The effects of the death tax results in nothing less than the killing of the American dream.”

Nonsense, says Harl.

“[Proponents of repeal] started spinning this thing and spun it as a ‘death tax,’ and they spun it as affecting family farms and small businesses, and that is a myth. M-Y-T-H,” says Harl. “I have never seen a farm or ranch business that had to be sold to pay a federal estate tax.”

Repealing the estate tax is an attempt by the nation’s super-rich to continue to concentrate wealth, says Harl, and that’s bad for the economy and bad for the country.

“The deficit is so large, we cannot afford to lose the $20 billion or so the estate tax is generating,” says Harl.

But the farmers and ranchers that plan to attend Thursday’s estate planning workshop have concerns that are closer to home. They want to know what they can do to make sure their farms are preserved and their families are taken care of.

“That will be my premise of the meeting,” says Goetting. “If you die without a will, if you die without planning for the future, here are the potential outcomes.”

jadams@missoulanews.com

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