Estate planning is the process of making arrangements for your declining health as you age and your eventual death. Proper planning can offer a host of benefits, including ensuring the smooth transfer of your most valuable assets to your loved ones when you die.
Although estate planning is important for anybody with noteworthy assets or dependents, it is of the utmost importance for those who have valuable assets that they intend to pass on to their children when they die, such as farmland. Farmers have unique considerations that they will need to address as part of their estate planning process in order to protect their family’s agricultural heritage and their wishes.
Farmers often need to protect their property
One of the first and most critical steps in the estate administration process involves settling the accounts of the deceased. Your executor will have to repay your creditors, file your taxes and resolve all outstanding financial issues before they begin to distribute assets to your heirs and family members.
For many farmers, the single most significant asset that they own will be their farmland, which could leave that property vulnerable to liquidation as part of estate administration in order to repay creditors. Holding the property in a trust is one way to reduce the risk of creditors making a claim against the farmland that has been in your family for generations. Other times, changes to how you hold title can also ensure a quick transfer of title.
Using real property to fund a trust can speed the process of transferring it to the next owner, possibly while also protecting your legacy from family members who might undermine it.
A trust can also prevent your children from selling your land
One of the most significant benefits of creating a trust is that a trust allows you to establish more rules for the distribution of assets after your death. You can limit how much people can withdraw at any given time or even restrict the reasons that they access the estate assets.
When it comes to the farm itself, you could, in theory, structure your trust in a way that will prevent family members from selling the farmland or using it for purposes other than agriculture. Looking at the long-term prospects for the area where you hold land and the crops that you produce can give you an idea of the best ways to structure a trust to protect your family’s agricultural heritage.