Attendees at a farm show in neighboring Minnesota heard important information about the special types of estate planning available for farmers to facilitate transferring family farms to future generations in the most advantageous way possible. Family farm owners here in Wisconsin face very similar concerns and challenges. Proper estate planning can provide key benefits not only to allow you to transfer your family farm to your loved ones, but also place them in the best position to keep the farm in the family for many generations to come.
One of the primary challenges faced by family farmers is that they may own a farm worth millions of dollars in land and equipment, but still be “cash poor.” This can present a challenge when the farmer dies, as it may trigger an estate tax debt. With proper planning, you may be able to defray or eliminate that tax obligation. This can be accomplished through a variety of techniques, including qualified transfers, gifting strategies or trusts, such as irrevocable life insurance trusts (ILITs).
One of the essential benefits of planning is the protection it affords family farmers. Many family farmers run their operations as sole proprietorship businesses. That means that all the farmer’s wealth is potentially at risk. Someone injured in a car accident could attack the farm’s assets as part of collecting on a judgment awarded to that person. Similarly, but in reverse, a disgruntled farm worker could, if successful in court, pursue the farmer’s personal assets in order to collect.
Using business entities, such as a limited liability company or an S-corporation, can help farmers separate their personal wealth from farm assets, and protect each in the process. Placing the farm and its assets in a business entity creates a legal separation between the farmer and his/her farm, which allows for greater protection. You can still transfer your farm to your future generations as part of your estate plan with your farm in a business entity. Your will or living trust can direct the transfer of ownership rights or shares in the farm’s LLC or corporation to the descendant you want to receive the farm.
Other family farmers may be unsure if their descendants desire to carry on the family business. Again, estate planning can help in this scenario. Your will or trust can include a provision that gives your selected family member an option to buy the farm, meaning that your loved one has right to purchase the farm, and that the farm may be sold to someone other than that family member if that person first declines the option.
The law has variety of tools in existence to give farmers considerable flexibility in passing on their family farms. Whether it is protecting yourself, your family and farm during your lifetime, setting up a son or daughter in the best possible financial position to take over the farm, or giving relatives the choice of continuing in the farming business, a well-crafted estate plan can ensure that your goals for your farm are carried out after you die. To learn more about protecting your family and planning for the future of your farming business, consult Madison estate planning attorney Daniel J. Krause of Estate Law Partners, LLC. He can help you have a plan for benefit of both your family and your family business. Contact Attorney Daniel J. Krause today.
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