Month: November 2013

Checking in on the FSA’s microloan program

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We’ve previously discussed the FSA’s microloan program, with its possibilities for beginning farmers.   With the end of the year approaching, there is now data concerning how many loans have been made, along with information on how many of the loans went to beginning farmers, veterans, or socially disadvantaged producers.

The National Sustainable Agriculture Coalition has an interesting article that delved into the microloan statistics.  Most pertinent for Nebraska and South Dakota producers is that both states have made microloans, just not to the extent of other states.  NSAC suggests multiple reasons: total number of producers, acreage size of operations, type of operations, FSA outreach and training on microloans, and other factors.

But what I find most interesting about the article is that promise that microloans hold for beginning farmers.  Of all microloans issued, 68% went to beginning farmers.  These microloans can (and did) cover many different operations, production methods, and producer needs.  Of particular import, the microloans covered these expenses without need to resort to higher-interest options such as credit cards, lines of credit, or high interest loans.  Less money paid in interest means more money for the operation and/or living expenses for the beginning farmer.

Ultimately, it is for the beginning farmer to determine whether microloans are a good fit for the operation and farming plans.  If you want someone to discuss your operation with and whether microloans are a good fit, you are welcome to contact us.  We’re happy to help!

Upcoming Events!

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Curious about LLC’s and leases?  Wondering how each can be used for your operation and for estate planning purposes?  Well, come to our workshop!

The workshop will be held in Syracuse, (December 10th, 2013) in the basement of the First National Bank.  The workshop is 9:30 am to 12:00 pm.  There is no charge for the workshop.  To register (and for questions) call the Rural Response Hotline at 1-800-464-0258.

The LLC (limited liability company) – What is it?  How is it formed?  How it is used?  This discussion will include information on LLC operating agreements; on using the LLC to keep the family farm or ranch going between generations; on using the LLC to protect assets from creditors and family circumstances; on using the LLC to separate ownership and control of assets; and on the use of the LLC in estate and gift tax planning.

In addition to the presentation and discussion on LLCs, there will be a shorter presentation on Leases:  what goes into them and how they are used, both in ongoing operations and as part of transition planning.

Joe Hawbaker, Agricultural Law attorney, with Hawbaker Law Office; and

Angie Miller, Farm Attorney with Beginning Farmer and Rancher Development Program Legal Aid of Nebraska will present the program.

This workshop is made possible by the Nebraska Network for Beginning Farmers & Ranchers, the Farm and Ranch Project of Legal Aid of Nebraska, the Risk Management Agency of the USDA, National Institute of Food and Agriculture, the Nebraska Department of Agriculture’s Farm Mediation, Otoe County Extension, and the First National Bank, Syracuse branch.

Other beginning farmer and rancher resources

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I spent last week in McAllen, Texas at the National Institute of Food and Agriculture’s (a USDA agency) Beginning Farmer and Rancher Development Program conference.  And all I can say is that I was blown away with the resources, programs, and amazing people across the country who are dedicated to bringing in the next generation of farmers.

I mention this because all these resources, programs, and amazing people can be found at Start2Farm.  Are you interested in an apprenticeship program for fruit and vegetable production?  Or maybe dairy production is your interest?  Perhaps aquapontics?  Or maybe you want to learn about farm transitions to the next generation?  All these programs, along with many more, are available for beginning farmers.

All that is needed to get started is a simple search on Start2Farm.  Start on ‘Personalize My Search’ and pick those areas and topics which apply to you and your interests.  Or maybe you just want to search for programs in Nebraska; you can do that with the keyword search in the upper-right hand corner.  You can also explore the various topics addressed by beginning farmer and rancher programs under ‘Topics’ in the center of the page.

The possibilities are seemingly endless and are for almost every possible interest in farming or ranching.  So go and explore — you never know where the path may lead!

Some basics about the federal estate and gift tax

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As discussed previously, the 2014 unified credit for federal estate and gift tax has been raised to $5.34 million per person.  But what does that all mean?

The unified credit is the term given to the total amount a person may exclude from federal estate and gift tax.  In other words, a person may transfer assets during their lifetime (i.e. gifts) or after (i.e. estates).  The amount a person may transfer via only gifts, only estates, or a combination of the two is the unified credit.  It is only when the credit is exceeded that federal estate and gift tax is owed.  In other words, if the combination of your gifts and estate totals $6.34 million, federal estate and gift tax will be owed on $1 million ($6.34 million minus $5.34 million 2014 unified credit).

Portability remains a possibility with spouses.  Remember that portability requires the estate of the deceased spouse to file an estate tax return, even if no tax is owed.  The estate tax return is due nine months after the death, with a six month extension permitted.

Also remember that the annual gift tax exclusion is different than the unified credit.  You can gift up to $14,000 per person without encroaching upon the unified credit.

A good article that goes over the above and a few other details is here.  If you are a Nebraska or South Dakota farmer or rancher considering business transition, feel free to contact us with any questions you may have about the federal estate and gift tax.

2014 Tax Exclusions, Exemptions Limits Released

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The IRS has released the 2014 tax exclusions, exemptions, and other information.  Of interest to this audience:

  • The unified credit (estate and gift tax, or basic exclusion) is $5.34 million in 2014.  Portability remains and the spouses can transfer up to $10.68 million tax free.
  • For an estate of a decedent dying in 2014, if special use valuation under section 2032A is used, the aggregate decrease in the value of the qualified property resulting from the use of section 2032A cannot exceed $1.09 million.
  • The annual gift tax exclusion remains $14,000 in 2014.
  • The loan limit for agricultural bonds for first-time farmers (“aggie bonds”) is $509,600.

Also included in the IRS notification are the 2014 tax brackets.  You may find this information useful as you begin tax planning for 2014.  (The information is on pages 5 – 7 of the notification.)

What does it all mean?  It means that there were no substantive changes to estate and gift tax in 2014 (as of this writing) and aggie bonds are available to first-time farmers.  Later this week we’ll go into further detail about estate and gift tax issues but for now, know that an individual will not pay federal estate taxes for a taxable estate under $5.34 million (or, if married, under $10.68 million).

In the meantime, should you have any questions, you are welcome to contact us!