Free Wealth Management Guide Financial Strategies For Selling A Farm Or Ranch

Financial Strategies for Selling a Farm or Ranch By: Christopher Nolt, LUTCF and John Clark, CPA An Educational Resource From Solid Rock Wealth Management Selling a farm or ranch typically creates significant tax consequences. Without proper planning prior to a sale, the wealth a family has worked a lifetime to create may be eroded by up to 50% or more.     This Wealth Guide will illustrate the sale of a highly appreciated $15 million ranch. The ranch is owned by a married couple ages 65 and residents of Montana. It will examine how the use of proven wealth preservation strategies can allow a family to: ·      Decrease taxes paid on the sale ·      Increase annual income for retirement ·      Increase wealth passed to heirs ·      Increase money left to charitable organizations   The advanced planning strategies include: ·      IRC Section 1031 Tax-Deferred Exchange ·      IRC Section 664 Charitable Remainder Trust ·      IRC Section 121 Personal Residence Exclusion ·      Strategic sale price allocation ·      Irrevocable Life Insurance Trust Four sale scenarios are illustrated: Option 1: Straight sale for cash of the entire $15 million ranch Option 2: Straight sale for $10 million and 1031 Exchange for $5 million Option 3: Straight sale for $5 million, 1031 Exchange for $5 million and Charitable Remainder (CRT) Trust for $5 million Option 4: Straight sale for $5 million, 1031 Exchange for $5 million, Charitable Remainder Trust for $5 million and purchase of a $5 million Second-To-Die Life Insurance Policy in an Irrevocable Life Insurance Trust (ILIT)   Below is a summary of each of the four options. The pages that follow provide greater detail. Scenarios are for illustrative purposes only and are not intended to represent any one particular situation. Summary Option 1 Option 2 Option 3 Option 4 Straight Sale Federal and State Income Tax Liability Annual Income from Reinvestment To Charity Upon Second Death Net Estate Passed to Heirs 1031 Exchange & Straight Sale 1031 Exchange, CRT & Straight Sale 1031 Exchange, CRT, ILIT & Straight Sale $2,890,200 $1,980,486 $638,074 $638,074 $847,686 $911,366 $1,005,335 $870,335 $0 $0 $5,000,000 $5,000,000 $19,516,837 $23,525,457 $22,565,485 $25,529,095 1