As a farmer, your land is your most valuable possession. While farm machinery is also quite valuable, it is worthless without property. Whether you are the third generation of your family to work this land or are the first member of your family with a passion for agriculture, protecting your land for the next generation could be very important to you.
For most people, estate planning is a quick process that only requires a last will. For those with unusual and valuable property, such as farmers, estate planning can be a bit more complicated. You have to think about what could happen to your farmland as you age or after you die.
Your land, for example, could be subject to claims by creditors if you have debt when you die. Even Medicaid might come after your property posthumously. Beyond that, your farmland would likely have to go through probate court to pass to someone else. Careful estate planning could help you limit all of these risks.
Putting farmland into a trust protects the property
When one person or a married couple owns land, the property is vulnerable to legal claims by others. If the couple gets divorced, each spouse could claim half of the property’s value. If the property belongs to one person, any lawsuits against that person could impact their ownership rights.
As previously mentioned, both private creditors and Medicaid recovery programs could come after your farm if you default on debts or to recoup benefits paid on your behalf after you die. By transferring your farmland into a trust, you effectively protect it from claims made against you as an individual. Divorcing spouses and creditors will have a much harder time accessing property held in a trust.
A trust reduces tax risks and simplifies intergenerational transfer
Real estate holdings usually have to go through probate during estate administration. When you hold the property in trust, probate administration is not necessary for the ownership to pass to the next generation of farmers.
Additionally, it will reduce the likelihood of estate taxes affecting your legacy. The value of your land might exceed the cutoff for the state taxes, but placing the property into a trust will prevent its value from counting toward the taxable value of your estate.
If you haven’t already done so, considering a trust for your farmland can give you peace of mind now and protect your legacy after you die.