"With the aging of the farm population, and particularly with the rapid appreciation of land values and the assets, there certainly is a need to plan how those [farm] assets are going to be transferred and if you want the business to continue," said Ron Durst, a tax specialist at the USDA's Economic Research Service.
Farmers simply have to plan more than most folks. Regardless how big and industrialized modern farming has become, success or failure remains tied to the ebb and flow of the seasons, or the water patterns, or the health of the livestock. Then again, farmers also have to plan more for their own sake, too.
Estate planning is simply essential to farmers and the family farm itself. Unfortunately, estate planning is too easily overlooked with all of the day-to-day work to be done. An article in USA Today, titled “As farmers age, planning for the future of their business grows,” explored this common problem.
Land is one of those things that seldom loses value. Agriculture, by definition, requires land (and lots of it) to operate on a profitable scale these days. Consequently, modern farms find themselves racking up a potentially hefty future estate tax bill on the basis of their land values alone.
Problem: When the land value represents the lion’s share of the estate value itself, then what happens when the estate tax bill comes due with only the land to pay the tab? Selling the farm would be akin to killing the goose that lays the golden eggs for the farming family. To make matters worse, the owners of family farms are getting up in years, and so time is of the essence when it comes to making plans to save these family farms.
The good news is that today, unlike for much of the last half decade or so, we have fairly firm estate and gift tax laws. Therefore, farmers and their advisors can make estate plans based on more than gut and intuition.
So, how do you pass on the family farm? Even more important, how will you pass it intact and who will run it after you do? These are questions that need an answer, sooner rather than later.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: USA Today (May 19, 2013) “As farmers age, planning for the future of their business grows”: