Farmers and ranchers are typically strapped for cash so when one of them dies leaving an estate large enough to be exposed to the federal estate tax the family can expect to have to sell something to cover the tax. That does not have to be the case. The estate tax has been described as a “voluntary” tax. Voluntary, that is, if you are willing and able to take advantage of the planning opportunities that are in the law. If not, life insurance can be a very appealing alternative to having to sell the family farm.
Living and working on a farm oftentimes means taking a different position toward land itself. If you also own the land, then it means you need to take a different stance toward your assets and your family wealth.
Farmers are in need of a proper and exhaustive estate plan more than anyone else. Fortunately, Hoosier Ag Today provided some helpful pointers in an article titled “Estate Planning for Family Farms and Ranches.”
While there are consistently bumper harvests, the land keeps on giving. Unfortunately, the land also is an incredibly valuable thing due to this potential giving. As a result, that value makes it fall prey to estate taxes if you try to pass it on to the next generation.
To truly own and understand the ownership of your land, it is necessary for a farm owner to make proper estate plans and to prepare for succession of the farm. For small farms that might be a simpler process, even modest planning can help preserve the family and the farm alike.
In the end, many farms will need far more than modest planning. The key is to select and implement the appropriate strategies for your unique circumstances. I recommend reading the original article, even if you aren’t a Hoosier (or don't even own a farm as the same issues hold true for most businesses).
Contact Meier Law Firm to discussion the bussiness succession options you can implement in your business.
Reference: Hoosier Ag Today (June 4, 2012) “Estate Planning for Family Farms and Ranches”