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American Society of Agricultural Consultants (ASAC)

White Paper: Federal Estate Tax & Farming

6215516 blog 1Without action by Congress, the 2013 federal estate tax will revert to a level that will threaten the future of multi-generational farming in the Northeast, according to an analysis released by Farm Credit East. (Download the full white paper.)

“Federal estate tax can be a large factor in whether a farm is passed on to the next generation” said James Putnam, executive vice president, Farm Credit East. “If estate taxes are too high, the next generation will have no choice but to sell real estate assets to pay the tax.” Under existing law, the estate tax exemption will decline to $1 million and the top rate will jump to 55% on January 1, 2013.

The federal estate tax is dependent upon the size of an estate, which may not reflect an ability to pay. Farmers often have significant real estate holdings and reinvest most of their earnings in their farm. This imbalance provides them with a relatively weak cash position to pay estate taxes upon their death. Often the only way to pay the estate taxes is to sell the farm, preventing a transfer of the family farm to the next generation.

On January 1, 2013 the estate tax exemption level drops from the current level of $5.12 million to the 2001 exemption level of $1 million. In addition, the tax rate will increase to 55% for the amount of the estate over the exemption level. This scenario would force many farm families to sell their farm assets to meet the estate tax liability.

“It is important for Congress to revise the current laws pertaining to estate taxes to ensure that farms are not forced to sell or break-up the farm because of estate taxes,” said Putnam.

For a full copy of the Farm Credit East Knowledge Exchange report, The Federal Estate Tax: Effect on the Farming Community, please visit Farm Credit East is the largest lender to agriculture in the Northeast and provides a range of financial services, including consulting focused on estate planning.


Farm Credit East extends more than $4.35 billion in loans and has 19 local offices in its six-state service area. In addition to loans and leases, the organization also offers a full range of agriculturally specific financial services for businesses related to farming, horticulture, forestry and commercial fishing. Farm Credit East is governed by a 15-person board of directors.
For more information, go to

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