Estate Planning Challenges for Farm Families
Farmers and farm families in California are faced with unique challenges when it comes to their distribution plans and passing on the farmland to future generations. It is true that there is no cookie-cutter solution that fits each farm family. A skilled and experienced estate planning attorney in California will be able to help you create an estate plan tailored to your needs and ensure that your and your family’s rights and financial future are fully protected.
Common Barriers to Estate Planning for Farm Families in California
If you are just starting out completing an estate plan, you need to realize that barriers exist. You need to be committed to finding a way to overcome them. The first step towards that end is to find a qualified estate planning attorney that understands your needs. These are a few typical estate planning challenges for farm families:
Unnecessary Estate Taxes
You need to consider the tax consequences of an estate plan when developing it. This is necessary for maximizing available assets and minimizing taxes at death. Land values continue to rise, which makes it important to pay attention to estate taxes.
Transition Plan
When passing on a farm to your child, you need to have an adequate transition plan in place. The plan needs to work as you intend it to or your child may end up losing everything. Many farming operations have failed in passing their assets to the next generation because the decedent ignored adding an estate planning component to the plan. In addition, the estate plan has to work with the farm transition plan. An experienced attorney will identify other factors for ensuring the continued viability of your farm.
Creating an Estate Plan That Fits Your Goals
If you die ‘intestate’ (without leaving a will) in that case California laws will determine the distribution of your property. In other words, the government or the courts will essentially determine how your farmland and other assets will be distributed. By creating an estate plan, you can be proactive in ensuring your wishes are met the way you want. If you already have a will, you should consult with your attorney about revisiting it. You cannot ignore the harsh reality that families change, priorities change, and personal goals change.
Overcoming the Challenges Associated with Estate Planning
These are a few ways to overcome the challenges associated with estate planning for farm families in California:
Determine Asset Succession
A great first step is to outline all your assets. You need to create a chart outlining the manner in which you want the inheritance divided among the heirs and other beneficiaries. This is a great method if you have certain beneficiaries that want to continue with the farming business and others that don’t. It’s not a bad idea to have an open conversation with your farming heir and let them pick the assets they want.
Using the 3-Step Appraisal Process for Valuing Farmland
Most conflicts arise during the valuation of farmland. An experienced attorney will use the 3-step appraisal method for lessening conflict regarding the valuation of land. The first appraisal is received by the estate or trust. If this value is disputed by a beneficiary, they can request a second appraisal. A third appraisal is conducted if the values of the first and second appraisals are vastly different.
Setting up an LLC
Setting up an LLC is preferable where there are multiple beneficiaries to farmland. LLC eliminates the possibility of partition. No beneficiary can force the division or sale of the real estate. A partition cannot take place when an LLC owns the land. You can also put the LLC in a trust if you don’t want to add another entity to manage it.
Long-term Leases
You can keep farmland in the family for some time by putting provisions in the trust that makes the distribution of inheritance conditional on a long-term lease. Assets are divided among the beneficiaries. However, long-term leases are used for keeping the land in place for the farming heir. The time frame on these leases can be made for up to 99 years.
Estate Planning for Farm Families Should be an Ongoing Process
Federal tax rates and tax exemptions will now change only when it gets passed by Congress. However, this doesn’t mean that you don’t need to worry about estate planning or make it a one-time event. You should revisit your estate plan once every 3 – 5 years. This is to make sure it fulfills the goals set and satisfies your needs.
You may need to make alterations during the birth of a child or grandchild or if there is a death in the family. Having a compassionate yet competent estate planning attorney can help you facilitate decision-making during grief-ridden periods.
Our Trusted Estate Planning Lawyers are Here to Give You the Best Legal Advice and Support. Call Now.
The experienced and trustworthy estate planning attorneys at Garmo & Garmo, LLP can help you transition your farmland and estate to the next generation in a simple, reliable, and beneficial manner. Our attorneys will create tailor-made plans that are best for you and your family’s individual needs. To set up your free and confidential consultation, call 619-441-2500 or reach us online.
