ARTICLE | January 25, 2024

This December we had the privilege of speaking at the Washington Cattlemen’s Association conference of business succession and estate tax planning in Agriculture. It was great to get a chance to connect and hear the history of their farms and ranches and help them plan for the future of these operations.

2024 is going to be an important planning year for many of our agribusiness clients, especially ranches who are looking at strong cattle prices and margins to start the year.  Here are a few items to focus on throughout 2024:

Many provisions in the tax cuts and jobs act of 2017 will expire in 2025 without an update from congress.

As this is an election year, a lot of the future of this bill is uncertain and dependent on November’s results both for the presidential election but also the majority in the house and senate. For many of our clients, instead of prepaying large amounts or deferring some of 2024’s profit into the future, this might be the year to pay some additional tax and make sure they have used up the historically cheap tax brackets available as well as take advantage of the Qualified Business Income Deduction which is a deduction up to 20% of the business income of the farm.  The decision to pay more tax in 2024 would especially be advantageous if the farm can utilize farm income averaging, which involves carrying current taxable income back to prior years and potentially using cheaper unused tax rates.

This is a year to focus on business succession and estate planning.

With the estate tax limits potentially set to drop significantly at the end of 2025, we are working with many of our clients with large land bases or business values to look at gifting (either to kids or trusts) or using valuation discounts to move value to the next generation.  It also is an opportunity to start conversations & begin business succession planning as well.  As we discussed during our presentation, many of these plans take time and a lot of discussion to be executed properly.  Starting the conversation now will be crucial for estate and business succession planning to potentially take advantage of the larger estate tax exemptions.

Finally, if work is already being done to either transfer land or ownership or make tax planning decisions, it is always a good idea to also check in on other tax & legal items such as:

• Ensure books & records are being kept up to date and timely.  It is critical to have good information to make decisions in an ever changing market.
• Are lease agreements in place (even with related party rental agreements).  Handshake deals are common and work, until a major event occurs and then there is significant risk for either party.
• Life insurance on key employees and business partners
• Wills are up to date and match the goals of the estate/business succession plan.

Thank you again to the WCA for the opportunity to speak at this past year’s convention. We look forward to a great 2024 and helping our agribusiness clients with their financial futures and the legacy of their farms & ranches.