When it comes to land management, one aspect that many landowners often put off for “tomorrow” is planning their estate’s transfer to future generations. However, estate planning is one of the most important actions landowners can take to ensure that one of their greatest assets is handled in a smooth manner once retirement age is reached or in the event of unexpected death or injury. It is essential for all parties involved to know what to expect, and having a plan in place offers peace of mind for both benefactors and those who will inherit land in the future.
There are many factors that must be taken into account when estate planning. Most obviously, experts emphasize the importance of having a legal plan in place, no matter how “settled” the land’s future is among the family. If there isn’t an actual legal document outlining the transfer, the state has the authority to allocate the assets according to state law. Having an estate plan that both outlines the distribution of assets as well as addresses business organization issues is essential for the successful transfer of the land to the final beneficiaries.
When estate planning, it is important to know how best to allocate farm ground among on-farm and off-farm children. Many initially conclude that the most equitable solution is to divide assets equally among all children. However, this avenue fails to take into account the difficulty the on-farm child would have in having enough money to buy-out his siblings, and often results in the land having to be sold to an outside party. Estate planning can address this situation, and allow the family farmland to remain in the family, as well as for all children to benefit as well.
In addition to the transfer of ownership, good estate planning helps reduce and avoid unnecessary taxes. Here it is especially important to have a trusted and competent advisor who is well-versed in tax law to avoid the considerable transfer taxes that can be incurred if not overseen carefully.
An estate plan also addresses many other key issues. It ensures practical ways to generate retirement income. It addresses how a spouse will be supported in the event of an unexpected death or injury, and covers medical and/or funeral costs. It also provides ways to secure a solid financial future for the next generation, including living and educational costs.
Experts agree: It’s never too early to establish an estate plan. In fact, waiting until retirement age can limit the ability to address tax concerns that may arise for heirs should they suddenly find themselves inheriting a large portion of land or other farm-related asset.
Ideally, estate planning is revisited often, since tax laws change frequently, and other factors such as land values can change greatly from year to year. It is important that landowners have trusted advisors to work with through the years in order to help them make these important decisions and to decide how best to manage the transfer of assets to the next generation.
United Farm and Ranch Management can provide complete solutions for your land. Whether you need assistance with day-to-day management or long-term planning, our farm mangers can help. Contact UFARM today for a free consultation.