Family Farm Planning
Successful Missouri & Illinois Farmers Control the Controllable
Successful farmers limit the “wild cards” in the deck by controlling the controllable. For instance, it is now possible to remove farmland from the transfer tax system forever, although few farm families are aware of or take advantage of this well-established legal opportunity. Using modern design techniques, it is now possible to pass farmland to the next generation tax-free, while retaining the right to control and manage the land for the rest of your life. In addition, various methods exist for discounting the true value of farmland for purposes of assessing transfer tax.
The Partition Suit may be the last chapter for many family farms which are passed to the next generation, at which time one or more of the heirs decide to sell their share, putting the other heirs into a bidding war at the courthouse door. Although a majority of first-generation family farm heirs may not want to sell the farm, some off-farm heirs will want to sell, especially when pressed by spouses who did not grow up on the farm and have no sentimental attachments to farm life. Second and third generation off-farm heirs frequently lose the sentimental attachment to the farm and look at it as a business asset that is not making enough money and is therefore to be converted to cash or “better” income-producing properties. The Partition Suit is a direct threat to continuation of the farm operation. However, it is possible to design and deploy planning documents which eliminate the possibility of the partition sale. These plans may also include voluntary buy-sell provisions to deal with owners who want out, while keeping ownership in the family, if desired.
Many farmers continue to operate the farm enterprise the same way it was operated in past generations, even though there have been dramatic changes in agri-business, regulations, liability, taxes and technology. (For instance, very few farmers are using the same machinery and equipment that “worked just fine” in prior generations.)
Keeping the family farm in the family requires specialized planning. For a farming operation to pass successfully through the decades and perhaps through the generations, the plan must be flexible, and must be protected from attacks by creditors and predators, including taxing and regulatory entities. Filling out a “one-size-fits-all” form for trusts, corporations, partnerships and LLCs will not provide sufficient protection and flexibility. To work well, these entities need to be carefully designed with your family’s specific operation in mind by an attorney with special training in agricultural planning techniques.
We have decades of experience in drafting specific farm management and asset protection provisions into estate plans. Feel free to contact us if you would like to discuss establishing this type of planning for your family farm operation. Let us put our experience to work for you.