You Don’t Have to Sell the Farm: How Effective Estate Planning Ensures the Future of Agriculture
By Katherine E. Merck
The American dream to create a better life for our children than the one we had is worth protecting. For many Americans, years of hard work on the family farm or ranch go into building this dream, only to be diminished due to a lack of effective estate planning.
Generational transfers of farms and ranches don’t just pass a livelihood down – they preserve the western way of life, the value of hard work and the land we love for generations to come.
Unfortunately, it is easy to overlook the value of a well thought-out, comprehensive estate plan. This oversight or lack of planning can end a multi-generational legacy and lead to subdivisions and development in the place of productive land. Although many of us don’t want to think about a world after we are gone, an estate plan can assure heirs won’t have to sell the farm simply to stay above water, and children and grandchildren can continue a family’s legacy.
While many similarities exist between a generational transfer of a family business and the passing down of a farm, agriculture presents a unique set of circumstances and challenges. One of the first and most important questions to ask before drafting an estate plan with an attorney is, “Who gets what?”
As simple as this question sounds, it is more complicated when it comes to agriculture. Do all of the children want to continue to work the land or only one of them? What happens if one child wants to buy the others out – is this a possibility or will it result in having to sell off land? Family dynamics are a challenging – yet imperative – aspect when considering estate planning.
Having clear goals will allow landowners to effectively communicate those goals to an attorney and ensure the estate plan is drafted in a way to implement clear objectives. Once the succession goals have been determined, one should be clear about those goals with potential heirs. While it may be a delicate and potentially difficult conversation, explaining your reasoning and your goals both verbally and in a written letter in addition to estate planning documents helps avoid family conflict after your death.
Besides ensuring your legacy continues after you are gone, effective estate planning can maximize tax savings and minimize family drama. Dying “intestate” simply means that one passed away without a will, in which case state law determines the distribution of assets. This process requires the involvement of the courts and dictates who will serve as the executor of an estate, a role that requires paying off debts and distributing personal assets.
By creating an estate plan, you can ensure this important job will be done by someone who is not only willing to take on the duties of the role, but will ensure your wishes are honored. Unfortunately, without an estate plan, wishes may not be legally enforceable.
Before an estate plan can be memorialized in writing and legally enforceable, there are some other important tasks. First, assets and land must be appropriately titled to be passed down through a will or trust. Joint bank accounts, for example, may frustrate the intent of an estate document because bank ownership generally controls. If there are mineral rights included in the estate plan, those need to be properly titled and addressed. While preparing an estate plan may seem daunting, an attorney who specializes in agricultural estate planning can help to address all aspects of generational transfer.
Last wishes ranging from the distribution of farm land and assets to the distribution of your personal effects and family heirlooms should all be included in a legally-binding estate plan in order to minimize potential family conflict. A contested estate not only tears apart a family, it can devastate them financially with higher taxes and attorney’s fees. Spending the time and money to create an estate plan now will save your family time and money and prevent quarrels, and it may just save the farm.
Katherine E. Merck is an associate attorney with Budd-Falen Law Offices, LLC with a primary focus on property rights, estate planning, environmental and natural resources law. Budd-Falen Law Offices, LLC, has attorneys licensed to practice law in Colorado, Idaho, Illinois, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Texas and Wyoming.
