Being Cognizant of the Federal Estate Tax Law

By Leon B. Resnick

wo years ago, when the Kansas City Chiefs won Super Bowl LIV, celebration ensued around Chiefs T Kingdom. A season of excitement, challenges and epic comebacks culminated with the ultimate prize.

What if your business mirrored Kansas City’s story, however, there wasn’t a celebratory parade at the end?

The The federal estate tax can be a parade stealer. As a business owner, you can run your company and invariably experience highs, lows, challenges and struggles and still come out on top -- or think you have.

The The federal estate tax was enacted in 1916, as a way to redistribute wealth in our country. There was a real concern that too few controlled too much of our country’s wealth (sound familiar?) and via the federal estate tax, that wealth would be redistributed (taxed) upon the death of an individual.

What What was once designed to zero in on the extreme elite, eventually became a tax on the ‘non-extreme elite’. Although statistically, a very small percentage of United States citizens actually will pay the estate tax, more land owners and business owners would be ravaged by the estate tax, as their assets exceeded exemption amounts.

T Today, in November 2021, those exemption amounts are the highest in our country’s history. Under current law, however, those high levels (11.7m/person and 23.4m/married couple) will essentially be slashed in half on Jan. 1, 2026.

This will increase taxes for some business owners and introduce a tax to others, that currently would not be taxed. For those over the exemption amount, the tax rate is 40 percent.

There There is momentum building on expediting the reduction scheduled for Jan. 1, 2026, combined with a much lower exemption and higher tax rate.

The The federal estate tax has always been fluid. The exemption levels have ebbed and flowed. For example, from 1987-1997, the exemption was only $600,000 with a top rate of 55 percent. In 2010, there was a one-year complete repeal (the federal estate tax has been repealed several times, and has always reappeared), and between 2011 and 2021, the exemption exemption amount has ratcheted up, while maintaining the 40 percent tax rate.

This alone can be confusing and it’s just one of the many reasons why we always insist our business owner clients, and the business owner audiences we present to, be proactive with their planning.

Like the fluidity of the history of the federal estate tax, owning a business can be similar. Some days may run smoothly, and others may include an unexpected list in which anywhere from one to 17 items need to be addressed. You never can tell.

So many business owners achieve personal financial success while also employing dozens, hundreds or more. The business owner makes a real difference in their communities and well beyond. All should be championed, but those that will be impacted by the federal estate tax may not have the championship parade at the end of the day.

If If you’re a business owner and not fully aware of what’s going on in the world of federal estate taxes, all the good that you’ve brought to your family, employees and community may come to a screeching halt. A thriving business one day could become the business that is now up for sale at fire sale prices, resembling nothing of the true fair market value. value.

As part of the federal estate tax law, the estate tax is due within nine months after date of death of the business owner (or any U.S. citizen that owns assets that exceed the exemption amount). If married, the tax may be deferred until the second spouse passes away. Also, any assets left directly to a qualified charity will escape taxation.

If If you own a business that you want to pass down to the next generation or other successors, you must be cognizant of the federal estate tax and the impending significant change.

Member News

Summit Homes Announces Next Raising Hope KC Beneficiary: Drumm Farm Center for Children

In September, Summit Homes broke ground on its annual charity home project. The 2021-2022 Raising Hope KC beneficiary will be Drumm Farm Center for Children. Drumm Farm provides care for children in foster care and homeless young adults. They concentrate resources on programs that will support those aging out of foster care build successful lives. For the first time ever, the Raising Hope KC home will not be listed on the real estate market to raise charitable funds. Instead, the house will sit on Drumm Farm. The house is a two-story, two-garage home featuring seven bedrooms, five bathrooms and a finished lower level. “This project will make a huge impact on our plans to expand our campus and be able to support more children in need,” said Brad Smith, Executive Director for Drumm Farm. The home will be completed in summer 2022. Follow the process at RaisingHopeKC.com.

Company Days at Pitt State

Ashlar Homes visited Pittsburg State in September to discuss careers in Construction Management with students. Pitt State’s School of Construction also offers degrees in Construction Engineering Technology, Environmental and Safety Management, Interior Design and Electrical Technology. KCHBA is proud to support students in these programs through Workforce Development scholarships and via the Home Builders Charitable Foundation.

The 2021 Ingram’s 250

Ingram’s 250 is a compilation of the most influential and powerful business executives and leaders throughout the Greater Kansas City Region. This year’s list features 14 KCHBA member companies.

• Academy Bank: Paul Holewinski (President/CEO) • Arvest Bank: Mark Larrabee (President/CEO)

• Bank of Blue Valley: Brent Giles (President/CEO) • Capitol Federal Financial: John Dicus (President/CEO)

• Central Bank of the Midwest: Bill Ferguson (President/CEO) • Commerce Bank: Kevin Barth (Chairman/CEO)

• Commerce Bank: Rob Bratcher (Kansas City President) • Commerce Bank: Jonathan Kemper (Chairman Emeritus)

• Country Club Bank: Paul Thompson (Chairman/CEO) • CrossFirst Bankshares: Mike Maddox (President/CEO)

• Greater KC Chamber of Commerce: Joe Reardon (President/CEO)

• Hunt Midwest: Ora Reynolds (President/CEO) • North American Savings Bank: Paul Thomas (President/CEO) • ReeceNichols Real Estate: Mike Frazier (President/CEO)

• Security Bank of KC: Jim Lewis (President/CEO) • US Bank: Tim Petty (KC Market President)

Kansas City Homes & Style’s 7th Annual STARS

STARS showcases outstanding real estate agents and team, home builders and remodelers. The following KCHBA members are featured on this year’s list. Congratulations! • New Construction Specialist – Pam Baker, Weichert Realtors

Welch & Co. (Director of Expansion and Relations) and Suma

Design (Client Care Manager) • Premier Home Loan Provider – Arvest Bank

• Premier Home Developer – Ashner Construction & Bodine-

Ashner Builders Legacy • Premier Dream Home Builder – Koehler Building Company • Exceptional Craftsmanship and Service Builder – Syler

Construction

• Top Custom Home Builder – Olympus Custom Homes • Premier Luxury Community Developer – Ellis-Simpson

Communities

New Location: Elevate Design + Build

Elevate Design + Build has a new home! Check out their office at 350 SW Longview Blvd., Lee’s Summit MO 64081. The new space was completely gutted and redesigned to include collaboration areas, conference rooms and a charrette area to assist clients in “seeing and feeling” a potential space. “This is a welcome change coming from an 800 sq. ft. office in Blue Springs. The Elevate team is quickly growing into the new space, with the addition of five new staff members,” said Angie Beerup, Elevate co-owner. Elevate invites you to stop by their Open House and Ribbon Cutting on Nov. 17, 5:00-7:00 p.m.

2022 Artisan Home Tour to Feature 10 Custom Homes, Support JDRF

The Home Builders Association of Greater Kansas City (KCHBA) is proud to announce the 2022 Artisan Home Tour will be hosted the first three weekends in June (June 3-5, 10-12, and 17-19). Presented by Ferguson Enterprises and Samsung, this tour will feature 10 unique and luxurious homes built by some of Kansas City’s finest custom home builders. KCHBA is partnering with JDRF (formerly known as the Juvenile Diabetes Research Foundation) as its charitable partner for the 2022 Artisan Home Tour. JDRF is the leading global organization funding type 1 diabetes (T1D) research. Some 1.25 million Americans are living with T1D, including about 200,000 youth (less than 20 years old) and more than 1 million adults (20 years old and older).

“We are excited to support JDRF for the 2022 Artisan Tour,” said Scott Bickford, chair of the 2022 Artisan Home Tour Committee. “People with T1D were some of the most vulnerable during the Covid-19 pandemic so we are thrilled to be able to support research to find a cure by hosting this tour.”

Leading up to the tour, the Artisan builders and JDRF youth ambassadors will work together to raise awareness of T1D. JDRF youth ambassadors will follow each home’s construction process and share their stories on social media throughout the process. Look for these hashtags on Facebook as the tour nears: #artisankc #kchba #jdrfkc. “At JDRF, we’re leading the fight against type 1 diabetes (T1D) by funding research, advocating for policies that accelerate access to new therapies and providing a support network for millions of people around the world impacted by T1D,” said Sherri Lozano, Executive Director of JDRF Kansas and Missouri Chapter. “The Kansas and Missouri Chapter of JDRF is thrilled to be partnering with the Kansas City Home Builders Association through the Artisan Home Tour!”

Artisan Tour homes will be open Friday through Sunday from noon until 7 p.m. The homes will be scattered throughout the Kansas City metropolitan area and tickets will be available in April online at www.artisanhometourkc.org. To tour all 10 homes, the first ticket costs $25 and each additional ticket costs $15. Alternatively, consumers can tour one home for $10. Builders participating in the 2022 Artisan Home Tour and the location of their Artisan homes are as follows:

• Bruce Rieke, B.L. Rieke Custom Homes, 21493 W. 94th

Terrace, Lenexa, KS 66220

• Joe Christensen, Cardinal Crest Homes, 8516 N. Booth Ave.,

Kansas City, MO 64157

• Russ Groshans, Casa Bella Construction, 5842 N. Lucerne

Ave., Kansas City, MO 64151

• Don Julian, Don Julian Builders, 17329 Larsen St., Overland

Park, KS 66221

• Justin Koehler, Koehler Building Co., 15921 Glenfinnan Way,

Village of Loch Lloyd, MO 64012

• Jeff Robinson, J.S. Robinson Fine Homes, 4414 W. 155th St.,

Overland Park, KS 66224

• Pete and Sarah St. Peter, PCDI Homes, 18749 Stillwell Road,

Linwood, KS 66052

• Gerry Starr, Starr Homes, 16206 Spyglass Ct., Loch Lloyd,

MO 64012

• Jason Walker, Walker Custom Homes, 15 Buffalo Ridge, Lake

Winnebago, MO 64034

• Patrick Willis, Willis Custom Homes, 16015 St. Andrews Ct.,

Village of Loch Lloyd, MO 64012