Unit 8, part 2 Estate Planning for Agriculture Forestry

							                Unit 8, part 2
                Estate Planning for Agriculture &
                Forestry: Basic Documents, Tax
                Issues, and Conservation
                Easements


An Educational Program of the North Carolina
Cooperative Extension Service
Adapted for ARE 306



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    Basic Documents
       Will
       Durable power of attorney
       Health care power of attorney
       Living will
       Trusts




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    North Carolina
    Inheritance Taxes
       Repealed effective January 1,
        1999
       Tax waivers eliminated
       N.C. gift tax not repealed
         $100,000   exclusion amount
       N.C. Estate Tax
         Replaces   inheritance tax
       N.C. probate tax – up to $6,000
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    N.C. Estate Tax
       Deaths after December 31, 2004
       Equal to allowable federal state
        death tax credit allowable under
        IRC §2011, as the IRC existed
        prior to 2002
       May take deduction under IRC
        §2058
       Inequity: no estate tax due under
        pre-2002 IRC, then no NC estate
        tax due
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    What is a Durable Power
    of Attorney?
       A document under the terms of
        which you give someone the legal
        authority to act for you if you
        should become physically or
        mentally unable to handle your
        own affairs
       The person who acts for you is
        called your “agent” or “attorney-in-
        fact”
5      May continue giving program if
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    What is a Health Care
    Power of Attorney?
       A document under the terms of
        which you give someone the legal
        right to make your health care
        decisions when you cannot make
        them yourself
       The person who acts for you is
        called your “health care agent”



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    What is a Living Will?
       A statement that you want to die a
        natural death
       You do not want life prolonged by
        artificial means if there is no
        reasonable hope of recovery




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    What is a Trust?
       A legal arrangement by which a
        grantor transfers legal title of
        property to a trustee who holds
        and manages the property for the
        benefit of the beneficiaries.




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    Types of Trusts
       Living trust
       Testamentary trust
       Revocable trust
       Irrevocable trust




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     Uses for a Living Trust
        Provide financial management for
         the grantor’s benefit
        Will substitute that provides privacy
         for intergeneration farm transfers
        Revocable trust
          Notax consequences
          Can be undone




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     Uses for a Testamentary
     Trust
        Make full use of unified credit
        Provide financial support for
         surviving spouse while preserving
         farm assets for children
        Irrevocable trust (after testator’s
         death)
          Separate    taxable entity
          Difficult to modify for unforeseen
           circumstances
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     Advantages of Trusts
        Flexibility
        Control
        Solutions to difficult family and
         financial problems
        Potential tax benefits (full use of
         unified credit)



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     Disadvantages of Trusts
        Expense
          Cost of establishing
          Cost of operating

        Complexity
          Record   keeping
        Loss of control of assets
         (irrevocable trusts)
        Income tax consequences
         (irrevocable trusts)
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     Tax Consequences of
     Irrevocable Trusts
        Maximum individual rate applied to
         income at low (<$10,000)
         threshold
        May avoid tax if all income
         distributed




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