Making a Difference: Turning Tax Into Gifts
By: Walt Mozdzer, Syverson Strege & Company
The Ag Progress Dispatch, June 2015
It’s often said that farmers and ranchers are “land rich and cash poor.” Most of their net worth is tied up in land, and while land may appreciate in value, its actual cash return can be low. And when farmers have significant income, they often want to invest those profits in more land.
But when retirement comes, there can be a spike in income as assets are sold or grain and livestock are marketed, without the benefit of offsetting expenses. For example, Hank and Harriett (not their real names) are retiring from farming. In their last year of business they will have significant income, and with it, significant income tax liabilities. They are also involved in their community and believe that giving back is important. They wondered: Is there a way to lessen the tax burden and at the same time help their community?
To answer Hank and Harriett’s question, the folks at Syverson, Strege and Company helped them establish a Charitable Remainder Unitrust (CRUT). The tool allowed the couple to immediately sell their grain to eliminate market risk, but take the cash as income over several years, thereby deferring the tax and using lower tax rates. At their deaths, the amount remaining in the CRUT will go to local charities, cementing their legacy and creating opportunities for their favorite organizations.
Retirement and succession planning don’t have to be financially painful and significantly taxable events. In fact, those transitions offer great opportunities to make a difference for churches, charities or colleges. We’ve profiled one tool here, but there are many others. Make sure your team of advisors includes people who understand how to make a difference for those organizations who are