Farm Estate Planning

Many farmers spend a lifetime accumulating land and investing in their farms. Most farmers have a desire to transition their assets and operations to the next generation. It’s complicated and time-consuming, so it takes a team of professionals to help and give advice on farm transition planning. A professional team can help farm families figure out all the issues involved in farm estate planning. Here are some tips taken directly from The Ohio State University Extension on how to get started. For more information, go to: https://farmoffice.osu.edu/blog-tags/estate-planning.

Don’t jump right to the plan—talk first.
An important first step to building a plan is getting the family talking and thinking. Ohio State University Extension has a farm management team that can assist with the initial steps. David Marrison, OSU Extension, recommends strategies for working with farm families, including understanding the legacy, encouraging the family to assess its strengths, weaknesses, opportunities, and threats, and helping the family deal with the issues or “elephants in the room.”

Organize, organize, organize.
A huge amount of information goes into a farm transition plan, and organizing that information is a challenge. A new tool that can help is the FARMS spreadsheet, currently under development by OSU Extension.

Know what’s in an appraisal.
Professionals use appraisals regularly in farm transition planning and estate administration, but do we understand what goes into an appraisal and what limitations it has? Talking with a local appraiser can help answer these questions. Appraisers use three methods to appraise a farm and its assets. First, comparable sales of local property, and a good appraiser makes adjustments for differences in those properties. A second method is the income approach, looking at the revenues, expenses, and net income and using an appropriate capitalization rate to determine a property's worth. The third method is the cost basis approach, often used on buildings, to estimate the value of these assets.

Divorce is a threat to reckon with.
A well-drafted pre-nuptial agreement can help reduce the impact a divorce can have on a farming operation. Farm transition planners also need to understand the process of divorce and parenting plans and how they can affect a farm family.

Be careful with business entity discounting.
Business entity discounts are ways farmers can legally pass on valuable farm assets to the next generation. Whether for “lack of marketability” or “lack of control,” business entity discounts can reduce the value of an estate and limit federal income tax exposure—but they need to survive IRS scrutiny.

It’s time to think about the 2025 estate tax sunset.
There are strategies to employ now to prepare high-wealth farms for the possible reduction of the federal estate tax exemption in 2025. The 2017 Tax Cuts and Jobs Act will expire at the end of 2025, putting the estate tax exemption, stepped-up basis, and bonus depreciation in jeopardy.

We need to encourage and mentor more rural professionals.
There’s a shortage of legal and tax experts who can advise farm owners and operators in rural areas. Beth Rumley of the National Agricultural Law Center and younger farm estate attorneys like Johnny Cottingum of Wright & Moore, Eli Earich of Barrett, Easterday, Cunningham & Eselgroth, and Jennifer Harrington of Iowa State University are some top farm estate attorneys. Many local attorneys and tax experts exist in high agricultural communities, but in other areas, you may have to travel to get expert advice on farm estate planning.

Know the ethics rules.
When an attorney represents a farm couple, farm family, and/or farm operation, lack of awareness about potential issues with confidentiality and conflicts of interest can get an attorney in trouble. Make sure you understand the rules of professional responsibility that can affect your farm transition planning.

Plans can differ.
There may be many different ways to address farm estate planning, its farm transition plan, and the administration of its estate and federal tax return. There can be many different paths to the same goal—different ways to slice the apple or get to a place that the farm family is comfortable. But in all cases, it takes a team of professionals to get the family through those hurdles.

Attorney Robert Moore says Ohio law requires certain documents like deeds, long-term leases, and vehicle titles to be notarized to add an extra layer of security and credibility to legal proceedings. Notaries primarily verify signatory identity, witness signatures, administer oaths and affirmations, and take acknowledgments. Notarization serves several critical purposes like combatting fraud, promoting trust, and facilitating legal processes. Farm estate planning can be difficult, but farm professionals help make the process easier.