By MICHELE F. MIHALJEVICH
Indiana Correspondent CHUGWATER, Wyo. — For Philip Ellis, the estate tax issue puts his family in an unfathomable position. He resents that the ability to keep their Wyoming ranch for future generations could rest on a personal decision his father may have to make.
His father, E.W. “Bill” Ellis, has end-state renal disease. He is currently on dialysis, but at 87, the success of the treatment and his quality of life will decline, eventually leading to him being taken off dialysis and going to a hospice. His death could occur within 15 days of being removed from dialysis.
“We figured Congress wouldn’t let it get to this point,” Philip Ellis said. “But this estate tax ‘limbo’ had led us to frankly discuss that his greatest contribution to our ranch, to his son and grandson, even after 60 years of hard work, could be dying in 2010.
“I resent that. I am galled that Congress could be so dysfunctional that we even have to have that conversation. We have discussed with our attorney possible contingency plans along the line of ‘if we die this year, do this’ and ‘if we die next year, do that’.”
There is no federal estate tax this year. The tax will return Jan. 1, 2011, with an exemption of $1 million and a tax rate of 55 percent if Congress doesn’t act. From 2001 to last year, the exemption for estate taxes increased gradually from $675,000 to $3.5 million.
Members of Ellis’ family have ranched in the Bear Creek area of southeastern Wyoming since the 1880s. Earl Marsh, Bill’s great-uncle, founded the current ranch in 1923. Ellis is the third generation to operate Marsh and Ellis Ranch, and the fifth generation to farm in the area.
The family has a cow/calf operation. The ranch is more than 10,000 acres. The family has done estate planning, as Bill’s grandson plans to join the operation after he graduates from college next year. Their planning, most recently tweaked in 2008, was made when the estate tax exemption was $3.5 million.
“Now we’re in this nightmare year,” Ellis said. “All the planning we’ve done is not quite appropriate for this year.”
Because of appreciation, the value of the family’s land could run into the millions of dollars, he noted, adding the ranch is able to support two families in a lower middle-class lifestyle.
“If the estate tax restarts, it will be devastating for our family. We don’t have the liquidity to pay any estate tax. It frustrates me mightily,” he said.
Despite his health problems, Bill has a fairly good quality of life, his son said. He keeps track of the cattle market and is in regular contact with Ellis about day-to-day operations. He is also able to ride around the ranch.
His father had been active on the ranch since 1945, when he came home from World War II, until he started dialysis in January 2007. The family is committed to agriculture and has had family meetings to discuss a “what if” scenario if the exemption returns to $1 million next year, Ellis explained.
“We would have to raise the cash somewhere,” he said. “We’d have to sell or refinance or marshal our savings. But our commitment to ranching is pretty high.” Saving a family legacy
The estate tax debate is about more than facts and figures, budgets and political haggling to Amanda Woodbury. It’s about trying to save the ranch her late husband’s grandfather and great-uncle started about 1917 near Como, Colo., 65 miles southwest of Denver.
Woodbury moved to the ranch in 1985 after she married James B. Gardner. She had two teenage children and he had two teenage boys. The family had a good life on the ranch, she said, but Gardner died of cancer in 2006.
The ranch was started by James’ grandfather, Roscoe, and Roscoe’s brother John. Byron Gardner, James’ father, was one of Roscoe’s six children.
“They were industrious, hard-working people who tried to make a living in any way possible using the locally available resources, timber mostly,” Woodbury said. “My husband grew up knowing he would make a living off the land.”
Over the years, the ranch has been known for cattle ranching, raising chickens and, for 33 years, selling Aspen transplants. The family cut mine props and railroad ties, and at one time had several sawmills. They cut logs and produced lumber for local and some Colorado Springs building projects.
In addition, the ranch’s grazing rights have been leased to several different cattlemen.
It was the intention of the Gardner family that the nearly 2,700-acre JBGardneRanch remain in the family, Woodbury said. She has been working with an estate planning attorney to come up with a way to pass the ranch on to her children.
“I am sorry that my husband did not set up a working heritage for us, but since he did not, it is now my responsibility and I take it quite seriously,” she explained. “The outlook is bleak for my children to be able to keep this place intact as the Gardners wanted. I fear that there will need to be a break up of the ranch in order to maintain any portion of it.
“We cannot come up with that kind of money for death taxes no matter how hard we try. The looming threat of the death tax burden has put me under a great deal of strain.”
Last year, Woodbury established a conservation easement on 560 acres, and plans to put 600 acres in another next year.
“I can’t tie it all up in conservation easements because my family will need the versatility for their own survival,” she explained. “The ranch makes just enough money from the grazing to pay the taxes and a bit more for minor maintenance costs. As my father-in-law always said, ‘You need a full time job to support your cow habit in these parts’.”
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