One of the goals of estate planning is to maximize the size of the estate while minimizing the impact of taxes and other fees. That can in turn make estate administration substantially easier for one's heirs. In that vein, readers may be particularly interested to hear that the Tennessee legislature is currently considering a bill that, if passed, would completely repeal the state's estate tax.
Under current law, when a person passes away, their heirs may find themselves having to pay state taxes on what they inherit. That can prove troublesome when the deceased was land rich but cash poor, meaning that the beneficiaries of the estate may have to sell some of the land simply to pay the estate taxes. Indeed, in the case of one Rutherford County man, the value of his farm has exploded of late as nearby developments are driving up the cost of land.
The farm has been in the man's family since 1807, and it consists today of 1,700 acres. When he inherited it from his mother, who in turn inherited it from his father, he had to pay $250,000 in taxes to the IRS. When he eventually passes away, his heirs may yet again have to pay estate taxes.
Fortunately, if the law is enacted, they may not end up having to pay state estate taxes, although federal estate taxes could still be assessed. Under the bill currently pending before the Tennessee legislature, the state estate tax would be repealed within four years. That could help his heirs with estate administration by allowing them to keep the farm in the family for another 200 years.
Source: The Tennessean, "Gail Kerr: TN's estate tax puts unfair burden on families," Gail Kerr, March 28, 2012