|Recently, I was interviewed by Sara Shafer at AgWeb.com about how the trend of increasing farmland prices can affect your estate plan and the potential tax implications on the next generation when the time comes.
Farmer’s National Company released farmland sales data for the first half of 2022. After most of the Grain Belt states saw a 15%-30% jump in value of farmland in 2021, the data shows an additional increase of up to 20% in 2022. The impact of this data and the general farmland value trends can have a significant impact on your estate planning decisions.
My experience tells me that most farmers, if not all, undervalue their land. If most of a farmer’s assets are tied to the land, it is crucial to pay attention to how this impacts the overall value of your estate. Currently, the lifetime Federal estate tax exemption threshold is $12.06 million per person which means there is no estate tax imposed upon the legacy you leave to your heirs that is less than that amount.
After 2025, however, the exemption is expected to drop to approximately $7 million per person and will result in a large tax liability for many more farmer and rancher families. This result is something that you may not have anticipated at the time you drew up your existing estate plan.
The only true measure of the value of your farmland is to offer it for sale. What your neighbors are willing to pay is usually within the current market range. Your other option is to have a formal appraisal of your assets, a step that is very important if you are taking your estate planning process seriously.
If North Dakota’s current average farmland sale price per acre sits at $8,200, a 1,000-acre farm could already be worth $8.2 million according to AgWeb.com/Land_Value. Proper valuation and professional estate planning can help minimize tax liabilities for both you and your heirs for generations.
Here’s a link to the entire article on AgWeb.com.