Comprehensive tax and estate planning amid political uncertainty in 2021 – Ohio Ag Net


By Matt Reese

The current mess of tax proposals and discussions in Washington, DC, coupled with high crop prices, startling increases in input costs, and an unreliable supply chain, is leading many farmers to make global decisions for farm for the remainder of 2021. With so many unclear and competing factors, it can be difficult to know what to do in the short and long term for farms.

Mike Weasel is the director of business development for Wilson National, LLC and has seen continued high prices for farmland, but also a bewildering list of challenges for the farming industry.

“John Stevenson was a good friend of mine who always said to me, ‘Mike, you have to remember that farming is a long term business’, to which I would respond,’ John, you have to survive in the short term or that. does not. does matter, “and I think I would say the same today,” Weasel said. “The issue of capital gains concerns a lot of people we talk to. The issue of base growth and the politics of it are quite important. With that, the market has been really strong in the last 12 to 15 months. We recently had a few very high auctions in Union and Madison counties. I have had 7 calls in the last month, all of them wanting to buy. I’m old enough to think this must be slowing down. It is not sustainable, but that said, there is no indication that it will slow down. ”

The high costs of agricultural inputs have not slowed the rise in land prices.

“Even with the high input costs they still envision a 2-3% return to earth and the owner / operator is pretty sure he can do better than that. They influence sales a lot, ”said Weasel. “If you are serious about selling land, you should consider an auction. Auctions drive it much more than private treaties. Do your homework. Prices are historically high at the moment.

Doug Walton, of United Country Real Estate and Walton Realty and Auction Co., LLC, sees similar trends in his Wyandot County-based business.

“We’re seeing some vendor activity right now. We have 8 land auctions booked for November and we are also seeing a lot of buyers entering the market if they can find something to buy. Money seems to be the least problem they have. The problem is finding those acres to add to what they already have, ”Walton said. “On your best lot tiled and having the types of soil, you will always see a rising percentage. On mediocre to lower soils I think we might see these start to level off, but we have seen higher prices since spring. It is nothing to see a farm for $ 8,000 to $ 10,000. There is a lot of old money in the market that is being spent. “

The high prices translate into a higher risk for buying land, especially for young farmers.

“Plan your budget in advance. Do not enter or bid to buy land. Of course, none of this is being manufactured anymore, but there is still land for sale somewhere, ”Walton said. “It makes sense to have a budget and a plan, and not just get caught up in the price of the whirlwind. If it’s a young couple and they come to us for advice, that’s something we always tell them. Make sure you plan what your position should be. If you want to be in the business 10 or 15 years from now, you have to start on a budget where it’s close enough to paying for itself.

The prices of used equipment are also very high at the moment.

“The shortage of parts has created a huge demand for used farm machinery,” Walton said. “It’s through the roof, especially if it’s been well maintained. It straightens the market. “

The high prices of land and equipment are attracting the attention of farmers considering retirement.

“We see a few people in retirement age who feel like they are up to the machinery and the dirt and they are ready to book a sale. There’s a little more interest there than we’ve seen in the last 12 or 18 months, ”Walton said. “But we live in tumultuous times. There are a lot of unanswered questions and uncertainty as to where we are headed. There are a lot of variables here at play. Interest rates coupled with higher input costs could slow this trend. It seems that whenever the farmer gets a break with higher prices, the inputs automatically follow suit and those input prices never go down once they go up.

When political debates at the federal level merge, confusion and panic can ensue. Ryan Conklin, a lawyer with Wright and Moore in Delaware, encourages a cautious and thoughtful approach to making decisions about these political debates.

“We have a number of customers calling who are a little panicked and concerned about what these proposals will do to their farms or their families. These proposals come out all the time. Some of them are good for farming and some are bad for farming. The president cannot change tax laws on his own. It has to go through Congress and we have all seen how slowly legislation is required to go through Congress. These tax code changes take some time and fortunately give us time to prepare and educate our clients, ”said Conklin. “Increasing the elimination of the tax base is a change in the tax code that would impact farmers and families, large and small. It is non-discriminatory in terms of the size and composition of the family and of the farm. It would be very difficult to plan farms if this change were to take effect. The inheritance tax exemption – with the current law it comes down to $ 6 million or $ 6.5 million in 2025 anyway – so many estate planners haven’t changed their minds on this, because we assume that most customers will live past this expiration date anyway.

With these questions and many more amid very confusing (to say the least) and politically motivated discussions at the federal level, it can be difficult to know the best course of action before the end of 2021.

“There are a few major bills that are just starting to roll out of committee in the House. From these conversations, we are starting to see what the priorities for tax change look like with these bills. Any action a farmer tries to take before this seems premature. You can run to your attorney’s office and start donating land or equipment because it feels like the sky is falling on you. But in the end, you can do more harm than good by taking these premature steps before you even know what the tax changes will be, ”Conklin said. “The best approach is not to wait until the very end to hire your tax and legal professional. Be in touch with them and have a plan in place for what will happen if some of these tax changes materialize. If anything changes in any part of the tax code, get out of the combine, run to the attorney’s office and start planning accordingly, or will you be three steps behind without a plan? ? Have these conversations, have a plan in place, and also take the time to really read what the proposals look like and how those possibilities will work out on their own. Farmers are great planners. In a normal year, tax planning may have started a few months ago. This year is different and you may be facing changes that come into effect on January 1 that you hadn’t anticipated. Identify your professionals and make sure they keep an eye on these areas. They could have a huge impact on your farm if they materialize.


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