Family owned farms, ranches and timberland present a unique set of considerations in the estate planning process. Typically the homestead and land will represent a high value asset that can be somewhat illiquid and often represents, at least in part, a source for retirement funding for the parents. While operations conducted on the land can provide for the production of income, it is often highly cyclical.
To further complicate matters, seldom do all of the children remain active in operations, which presents the parents with a difficult question of whether equal is truly equitable. Finally, it is not unusual for all members of the family to maintain an emotional tie to the land to some extent.
If one of more of the children are active in the operation and have proven themselves capable of successfully managing the operations, a combination of estate planning techniques can be utilized to provide for the needs of the parents during their lifetime, accommodate the transfer of the land and operations across one or more generations, minimize the estate tax consequences of the estate transfer, and provide for the financing of any estate tax that is due upon the parents’ death.
If none of the children are active in the operations, but there is an emotional based desire to retain the land for the enjoyment of future generations, a different set of considerations are presented and a different set of estate planning techniques are available to accomplish this objective.
The estate planning process for farms, ranches, and timberland is emotionally difficult, requires a significant amount of time to work through the decision making process and requires yet more time for implementation. However, if the family embraces the process and diligently pursues its conclusion, the results can be impressive and often preserve order within the family and a significant portion of the parents’ estate from taxation.
If you have an interest in exploring the estate planning process for your farm, ranch or timberland, we would appreciate the opportunity to meet with you and discuss your concerns and the considerations you confront as you search for the combination of techniques that provide for your lifetime needs, maintain harmony in your family and provides for the transfer of your estate from one generation to another.