Many individuals believe that estate planning is only for the very wealthy and required to save on estate taxes. However, an estate plan can be so much more.
When a family owns land, it can mean many things to different members of the family. For some, it’s a working landscape. Others might consider it a habitat for wildlife, family heritage or connection to place. Fortunately, it can be passed down from generation to generation. For many, it represents a legacy and emotions are often associated with land, a ranch or family farm.
Many landowners want to preserve the family farm and their way of life after death. Often it is the idea of leaving a legacy to children and grandchildren that is important. Most do not want to lose their land to development, and they may have family members that depend on working on the farm for their livelihood. If the principal owner suffers a disability or passes away, continuity of operations is critical.
Working with a team of professionals to plan for your estate is an important decision to reach the desired outcome for your legacy property. Your team can help you plan for the passing of the principal owner as well as unforeseen scenarios due to mental or physical incapacity. Your plan should include important, and sometimes difficult, decisions about who will inherit the land and how they will use it. A family farm would also require planning for livestock, farm equipment and other assets.
There may not be an easy solution to these questions, and some may choose to avoid making these decisions. Others may work with a team of professionals to create a plan but fail to review it when life circumstances change. It is a good idea to revisit your plan after marriage, divorce, births, deaths, illnesses, bankruptcy, lawsuits, job changes and/or relocations.
Many times, landowners use beneficiary designations such as Payable on Death (POD), Transfer on Death (TOD) or beneficiary deeds. Others add family members as joint owners of their assets. Doing so can sometimes result in unintended owners, unequal inheritances, and family quarrels.
In addition, outright distributions may not be protected from creditors, divorce, or lawsuits. Using business entities such as corporations, partnerships or limited liability companies may offer better protection for the owners during their lifetime and allow them more control.
Given the complexities and potential for tax law changes, an estate planning attorney should be engaged. This professional can design a plan to ensure ongoing farm operations or create future income by using the land in a completely different way. For example, it may be possible to protect one portion of your land while allowing another part to provide income. Also, a team of experts can share ideas you might consider reducing the property tax or estate tax burdens associated with your land. For instance, a conservation easement on some or all your land may be a tax efficient way to address estate tax concerns.
Working with a solid team of professionals to develop, implement and monitor a plan is important and oftentimes overlooked. Your team should include an estate planning attorney, accountant, and corporate trustee. At Central Trust we have helped many farmers and landowners develop a team and plan to preserve their land, farm legacy and way of life for generations to come.