Bozeman Daily Chronicle: From one generation to the next: A look at today’s obstacles to passing down family farms and ranches
Recently at his family’s Springhill farm, Bruce Wright stood and surveyed the property.
Across the dirt road were the farmhouse and barn, painted yellow. Fields of wheat, barley, sunflowers and oats surrounded him, and the snowy Bridger Mountains loomed ahead, their summits shrouded in a thick layer of fog.
“I was born here and grew up here,” Wright said. “The farm has sustained us and allowed us to earn a living in a beautiful place, doing a job we love to do. It provides us with food, housing and a way of life.”
As a farmer, Wright’s list of concerns is long and plentiful: Will it snow? Will it rain? Will the crops turn out?
Another worry is how to keep the farm in the family. But Wright figures that one can wait. The other issues are more pressing. Plus, his father, who owns the farm, is in great shape.
“Why put off until tomorrow what you can put off until next week?” Wright joked.
Still, every rancher eventually has to ask: What happens next? Who will tend this land, these animals and crops when I’m gone?
Death isn’t a pleasant subject, but it’s one that inevitably arises in ranching families, initiating a difficult process: passing down the family land.
Leaving land to your heirs is not as simple as it once was, like when Wright’s great-grandparents were farming.
There can be legal hoops to jump through, family disputes and the inability to make ends meet. Sometimes it means losing the farm. Today’s farm and ranch families must plan ahead.
Obstacles to keeping open land
There is a good deal of open, rural land in Gallatin County.
“In an area like ours, that’s what people really appreciate about moving here,” Joe Skinner, a county commissioner, said. “If you start breaking that up, it reduces everybody’s quality of life.”
In his time on the commission, he’s seen farmland turn to subdivisions in every part of the county. One reason is family tensions. Farmland is originally owned by one patriarch, who might pass it down to three sons, who then might pass it down to their half dozen or so kids.
“Then there’s just more possibility for disagreement,” Skinner said.
Some might want to keep farming, and others might want to cash in and sell the land.
Skinner said estate taxes also contribute to urban sprawl and loss of farmland.
“I don’t like them,” said Skinner, whose family owns a farm.
His is a common reaction among farmers.
The federal estate tax is also called a death tax. According to a fact sheet by a Montana State University Extension family economics specialist, it is “a tax against the estate of a deceased person for the right to transfer property at death.”
Sometimes when farmers or ranchers die and pass on land to their children, the children must pay a federal estate tax on the land. Many fear that the tax will be so great that the children will have to sell parts of the farm.
This year, though, most farmers and ranchers in the state don’t have to worry. That’s because the estate tax only affects ranches worth more than $5 million or $10 million – depending on whether a single person or a couple own it. Most ranches in the state aren’t worth that much.
According to a 2007 census from the U.S. Department of Agriculture – the most recent available – only 3.9 percent of the state’s farms and ranches are worth more than $5 million. Only 3 percent are worth more than $10 million.
“This is one of the biggest things that’s happened in estate tax,” Ben Hurwitz, a Meagher County commissioner and cattle rancher, said recently of the $5 million exemption. “As long as this stays in place, most ranches won’t fall into that category.”
However, the exemption expires at the end of this year, and Congress will decide whether to change it, eliminate it or keep it the same.
Already, the exemption has changed a half dozen times since 2001, according to the MSU Extension fact sheet.
That creates uncertainty.
Wright, for example, can’t plan ahead for the farm when he has no idea what the exemption will be when it’s time for his parents to pass down the land.
He strongly dislikes estate taxes and wishes the federal government would do away with them. At the very least, it would be helpful if Congress could pass a provision that would be in effect for decades, to allow for planning.
U.S. Sen. Max Baucus, a Democrat, is chairman of the Senate Finance Committee and has pushed for a permanent estate tax policy. In 2010, he helped negotiate a tax cut compromise that increased the exemption amount for estates to $5 million and lowered the top estate tax rate to 35 percent.
U.S. Sen. Jon Tester, D-Mont., voted for that legislation, and Rep. Denny Rehberg, R-Mont., voted against it.
Jed Link of Rehberg’s office said Rehberg voted against the legislation because it actually reinstated the estate tax. He said there wasn’t an estate tax at the time, and Rehberg wants to permanently eliminate the tax.
Meanwhile, Baucus has said he’ll keep working to make sure there’s a permanent estate tax law. The current policy expires Dec. 31.
“Montana’s family-owned businesses, farms and ranches are the lifeblood of our economy and have, over generations, helped define who we are as Montanans,” Baucus said in a prepared statement. “I’ve supported repealing the estate tax in the past and am going to keep fighting for permanent estate tax relief to make sure no one should ever have to sell the family farm or ranch to pay the estate tax.”
Tester said there needs to be “a simpler, fairer and more predictable tax code that works for all Montanans, small businesses and family farms and ranches.”
