Estate Planning For The Family Farm
Family farms often represent years of family history. It is not uncommon for farms to be operated by generations of the same family, creating not only a source of income, but a family legacy. However, these family farms often raise special issues in developing an estate plan to not only distribute assets, but protect that legacy.
One issue that frequently arises is distribution of the estate when one child has shown an interest in continuing the farm operations, while other children have not. Often times parents wish to allow a child to continue the farming operation, but still want to provide for their other children. This can create issues regarding the distribution of estate assets, particularly if the value of the farm land is higher than the value of other estate assets.
Sometimes, just the opposite scenario exists, when multiple children want to operate the farm, and the issue becomes how to equitably divide the farm operation among multiple children. This can also be difficult, as children try to lay claim to farming equipment or desired parcels of land. In either of these situations, careful estate planning can help to avoid disputes and ensure a smooth transition of the farm operation.
Another major consideration in transitioning a family farm upon death, however, is the payment of estate taxes and probate inventory fees. Often times, an estate is rich in land, but low in liquid assets (cash). Families are faced with a difficult choice of selling farmland to pay probate inventory fees and/or federal estate taxes. As the value of farm land increases over time, many farmers are not aware that tax problems could be looming at their death.
These are just a few of the issues which can arise with the transition of the family farm. When a probate asset is rich with family history, as a family farm is, there is often a strong desire to keep the asset in the family. While estate planning is important for all families and business owners, it is crucial for farmers to protect the family heritage.