Estate planning is simply essential to farmers and the family farm itself – just as important as the equipment, livestock, or crops involved. Unfortunately, estate planning is too easily overlooked with all of the day-to-day work to be done.
A recent article in USA Today, titled “As farmers age, planning for the future of their business grows,” explored this common problem.
Land is one of those things that seldom loses value. Agriculture, by definition, requires land (and lots of it) to operate on a profitable scale these days. Consequently, modern farms find themselves racking up a potentially hefty future estate tax bill on the basis of their land values alone.
Problem: When the land value represents the lion’s share of the estate value itself, then what happens when the estate tax bill comes due with only the land to pay the tab? Selling the farm would be akin to killing the goose that lays the golden eggs for the farming family. To make matters worse, the owners of family farms are getting up in years, and so time is of the essence when it comes to making plans to save these family farms.
The good news is that today, unlike for much of the last half decade or so, we have fairly firm estate and gift tax laws. Therefore, farmers and their advisors can make estate plans based on more than gut and intuition.
So, how do you pass on the family farm? Even more important, how will you pass it intact and who will run it after you do? These are questions that need an answer, sooner rather than later.