Western lands and the Estate Tax

I'm digesting a couple of articles on Ranching, Conservation easements and estate planning. One by the AP and in the High Country News.

From HCN - "The most heart-wrenching losses happen one piece of land at a time, one family at a time. The old man dies. The estate is a mess. The kids have other jobs. They can't afford the taxes."

Land-rich, cash poor Western ranchers are also lobbying Washington to exempt them from the estate tax. “I don’t like subdivisions and I don’t like development, a second-generation cattle rancher is quoted as saying to the High Country News, “There’s a lot of us around here that have got that feeling. We just don’t want to see houses built all over our land.”

The rancher in the A/P story is a a southern Colorado rancher who is afraid the estate tax will make it impossible for him to pass is 4,200 acre ranch to his children. He says estate tax issues "complicate the life of a simple man."


"I'm not an educated man and I'm not a moneyed man," he said. "I'm just a cowboy... an 80-year-old cowboy now."

Even so, ranchers who don't deal with estate planning could find themselves in trouble.

Since 1980 the Western population has almost doubled. There is tremendous pressure on the land away from agriculture to residential, commercial and industrial uses. The most attractive land left for development is the same land that is most productive for ranching and wildlife. These are lands in mid-elevation mountain valleys and near rivers and streams. This immense economic pressure to develop and subdivide the land can actually help ranchers and conservationists alike with or with out an estate tax repeal.


The Salazar Brothers

Obama’s new Interior Secretary, John Salazar hails from Colorado and grew up on a ranch in the in the Southern part of the State and is sympathetic. His brother Rep. John Salazar has introduced a bill that would eliminate the tax for ranchers.

The Department of Agriculture Economic Research Service opposes this approach and argues for a different way. They say using special valuations and conservation easements can reduce the value of an estate and let families escape the tax. A special valuation can occur if heirs agree to use the land for agriculture and agree to hold it for at least 10 years.

Conservation easements are ways for conservation, non-profit groups, or government entities to buy the rights to develop someone else’s private land and then not to develop it. It keeps the rancher on his land, puts a chunk of cash into his hands, and reduces the inheritance taxes by lowering the value of the estate. Adding up all exemptions, less than 1% of farms will be subject to estate tax the Department says.