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HEATHSVILLE—Time is running out for thousands of Virginia farm families worried about how they are going to pay estate taxes after Dec. 31.
That’s when the federal estate tax jumps from zero to its previous rate of 55 percent, with only a $1 million exemption.
Northumberland County grain grower Robert Hall remembers how crippling the old estate tax was to his family when his aunt died in 1991. He faced a $600,000 tax bill plus legal fees and capital gains taxes.
"We had to sell my aunt’s investments, just about all of them, to get the money to pay the estate tax. We were hoping that money could possibly be used to restore … the family homeplace," said Hall, who also serves on the Virginia Farm Bureau Federation board of directors. "It hasn’t been occupied since 1959, but in 1991 it was still in pretty good shape and it would have taken about the amount of money we had to pay the government to restore this house.
"We could not believe the government thought they had the right to take this money," he said. "As far as I was concerned, it was theft and grave robbing. I just still cannot believe it."
The House of Representatives has passed an estate tax bill, but a Senate bill is still being developed. The uncertainty of what will happen has many farm families and small business owners worried, according to Lindsay Reames, VFBF assistant director of governmental relations.
"The estate planning that you’ve done for 2009 is not the same as what you’ve done for 2010," Reames said, "and it definitely won’t be the same in 2011. So all the plans that have been in place—and it takes a long time to work with families and make those tough decisions—are going to have to be done again once Congress finally acts. And it’s the uncertainty that really puts a lot of land in peril."
Farm Bureau would like to see the federal estate tax rate remain at zero, Reames said. But if Congress does decide to re-impose the tax, the organization believes it at least should be indexed for inflation and have a much larger exemption before tax is due.
Hall said returning to an exemption of only $1 million is unfeasible and unfair to any small business owner or farmer.
"The man that owns the cleaners down the street, or who owns a restaurant—every last one of them, under that $1 million exemption and 55 percent tax rate, will have to pay a large amount of taxes to the government when they die," he said. That would prevent almost anyone from passing on their business to the next generation, he added.
Contact Reames at 804-290-1019 or Norm Hyde, VFBF senior video producer, at 804-290-1146
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