The family farm is more than just an asset and an estate plan for the family farmer should do more that simply name heirs, nominate executors and provide for guardians. It should offer a framework for the smooth transition of the family farm from one generation to the next.
The estate plan should transfer ownership and management of the farming operation, land and assets. It should avoid unnecessary income, gift, and estate taxes. It should ensure financial security and peace of mind, not just for you, but for all generations and it should help develop the next generation’s management capacity.
An estate plan will start with a Will, a health care directive and a power of attorney. Since laws, especially tax laws, change it is important to review and update these documents regularly so that these documents continue to ensure that your family will continue to make decisions should the landowner becomes seriously injured or terminally ill. As the estate plan for the family farm develops, additional thought will be put into evaluating the appropriate form of business and methods for transferring both operations and assets to the next generation while insuring that all generations are comfortable with the commitments involved.
An advanced estate plan may include strategies like
- Using conservation easements to protect farmland from non-farm development (this can also reduce transfer taxes where the market value of the land is much greater than its restricted value);
- Annual gifts of assets to gradually transfer the farm to the next generation as well as to reduce the taxable estate;
- Including life insurance to fund buy/sell agreements, establish trusts, pay for estate taxes, provide for non-farming heirs, and to ensure there are liquid assets to pay expenses and bills without selling land or equipment
- Incorporating structures like limited partnerships, corporation, and buy/sell agreements to insure an orderly transfer of the farm and, if desired, to allow for the separation of management and ownership.
- Having long-term care insurance to protect family assets from being used to pay for nursing home costs.
- Trusts to provide financial security for surviving spouses, children and grandchildren.
Successful estate planning for the family farm will balance commercial and conservation goals, it will provide equitably for all heirs and will be a team effort, included financial, tax, and legal advisors. It will also recognize that providing equitable settlements for the heirs does not, necessarily, mean creating equal shares of a farm for all, rather it can mean providing adequately for each heir’s needs and recognizing each child’s contribution to making the family farm succeed.
The successful estate plan is tailored to the needs of the family farm’s circumstances. It is designed to meet the unique situation and goals of each family farm.
If you would like to discuss your estate planning needs, Cameron Law is here to help.
For a complimentary initial consultation, call 507-206-4976