A client of mine, Betty, contacted me a few years ago at the suggestion of her CPA to review a potential estate tax problem.
Betty and her husband had purchased ranch land in Montana when they were married nearly fifty years earlier. They established a ranch and raised cattle on the land, and when they saved enough money, they added more land to the ranch. The combined purchase price for the land was around $100,000, an amount that was not easy to come by in those days but which they were able to save through hard work and sacrifice.
Some of the ranchers in their area had died recently and their families were forced to sell the ranches to pay estate taxes to the IRS. A few years earlier, Robert Redford made a movie called “A River Runs Through It.” The movie was set in Montana and was about fly fishing the rivers near the ranch. Soon it became popular for Hollywood celebrities to buy “trophy” ranches in Montana. The value of ranch land soon skyrocketed.
When we had Betty's ranch appraised, we discovered that it was now worth nearly $4 million. The estate tax bill on the ranch alone would have been approximately $1.2 million!
Betty and her family still made their living by operating the ranch and the only way they could pay the tax would be to sell the ranch. Through some careful estate planning, we were able to reduce the estate tax liability and preserve the ranch for Betty's family to enjoy for many generations to come.
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