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Estate Planning for Farmers

Everyone needs an estate plan, but farmers may need one more than most people because of the kind of assets they have to pass on, the need for hands-on management of an active business and the very real emotional attachment many feel for the land and farming as a way of life. Of course, there are all the usual reasons, too, including the need to plan for incapacity, take care of loved ones, not all of whom may be shaping up as farmers, and minimize taxes.

At Wiles Law Firm, LLC, we understand the needs of South Carolina farmers and would be happy to help you plan to achieve your goals. Come in to talk to us. We have some strategies to share.

The following are just a few of the situations we see frequently:

Illiquid and Undervalued Assets

Many farmers have more valuable assets than they think, including land, a home and the assets necessary for running a business. They are also notorious for undervaluing these, especially the land, which may not have been accurately appraised in years.

The first step then, certainly before deciding that you do not need to have an estate plan because you and your spouse fall below the federal estate tax threshold, is to have an accurate valuation done. Now is the time to get a firm appreciation of your actual net worth and to gather up important legal documents like deeds, titles and other contractual agreements.

The second step is to realize that, even if the sum of your holdings is unlikely to trigger federal estate tax liability, you and your spouse may want to make plans beyond simply avoiding taxes. Many other expenses come due in the later years of life, including medical bills and the possibility that you will need long term care. Do you want to plan to keep the farm in the family?

All of this is complicated, of course, by the fact that farm assets are not especially liquid. Selling all or part of the land or business may seriously diminish the value of the whole and leave less for survivors than you intended. Who has not heard sad stories of good farmland gone to waste because the ownership has passed to distant heirs, who have never met one another and have no interest in farming?

If selling is the best choice, you should have the benefit of good advice about whether the farm is worth more as a going concern or whether the component parts have a stronger value. If, after doing through the process of a self-audit, you are uncomfortable about the illiquid nature of what you own, it may be time to consider diversifying before an expensive emergency strikes.

How to Leave the Farm to Children or Grandchildren

There are a variety of strategies for how to do this. But it is important to recognize that not all potential heirs may be equally interested or adept at running a farm. There are more ways to be fair than simply dividing the land and business into the appropriate number of equal pieces. That may be the worst choice.

Transitioning the farm to children or grandchildren might involve creating a corporation, limited liability company or a trust to hold ownership. It could involve the creation of buy/sell agreements or a landlord/tenant relationship with a right of first refusal.

These approaches could also have a significant impact on the Medicaid spend-down requirements many older farmers face if they need nursing home care. Because these arrangements can come into effect during the farmer’s lifetime, they may also provide the opportunity for management training before the younger generation needs to take over operation of the land and business.

Planning for Incapacity

If you or a spouse are injured or ill and cannot live alone any more, it may be necessary to consider nursing home care. Slightly more than a third of Americans over the age of 65 will need nursing home care at some point in their lives, and the percentage climbs steeply with age. Unfortunately, that is very expensive and not covered by Medicare or most insurance providers. Medicaid will pay for nursing home care, but if you have valuable business assets or valuable farmland, you may not qualify for Medicaid coverage. You may have to sell land or business assets to afford nursing home care.

This is an issue no one really wants to think about, but it may be possible to manage in a way that minimizes financial consequences if the planning begins early enough.

Minimizing taxes

In the United States, many farmland owners are land rich, cash poor and have little or no estate plan in place. As farmland and related asset values increase over time, the bottom line on a balance sheet goes up, and an estate plan issue could be waiting on the horizon.

In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA doubled the federal estate tax exemption amount to $11,180,000, however, the increase is designed to sunset in 2025. The future direction of tax law is, quite frankly, anyone’s guess.

Is it clear, however, that a substantial farm with an average value of $12,000 per acre can easily trigger federal estate tax, especially when the value of other assets is also included.

Because of future legal and market uncertainty, every farmer should have an estate plan. A plan is even more important when other goals are considered, as well.

How Wiles Law Firm, LLC Can Help

Come and have a conversation with us about how to achieve your long-term goals for your family and your farm. Although, we frequently deal with questions about transitioning farm property or how to plan for taxes or unforeseen expenses, you may have different and more individualized concerns. Please contact us today to schedule a consultation.

Wiles Law Firm, LLC helps clients with their estate planning needs in Charleston, South Carolina and the surrounding areas such as West Ashley, Summerville, North Charleston, Mount Pleasant, and John's Island.

Information on this website is not legal advice. Further, viewing of the enclosed information does not create an attorney-client relationship with Wiles Law Firm, LLC. Matters will be handled by attorneys who primarily practice out of our office in Charleston County located at 852 Lowcountry Blvd., Ste. 101, Mt. Pleasant, SC 29464. M. Emerson Wiles, III is the attorney responsible for this advertisement.

Any result Wiles Law Firm, LLC may achieve on behalf of one client in one particular matter does not necessarily indicate similar results can be obtained for other clients. Please contact a South Carolina estate planning attorney or one of our attorneys with Wiles Law Firm, LLC for a consultation regarding your unique estate plan.

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852 Lowcountry Blvd., Suite 101, Mount Pleasant, SC 29464
| Phone: 843-718-0232

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