I recently heard about a farmer who said he never considered his farming operation large enough to ever be exposed to estate tax. But in recent years, his farm has grown.
He's invested in land. He and his family have built side businesses. They've added grain bins and tiled some ground. With rising land values and the growth of the operation his net worth has risen substantially.
He said he's realized he can't keep thinking that his operation is 'safe' from estate tax anymore. So he and his farming partners have decided to take action. They'll start working with one of our legacy advisors soon to put a plan in place.
We all know the rapid changes that have happened in farming in the past few years with land values, market volatility, grain prices, input costs, and the cost of machinery. It seems there is more at stake each year.
If you haven't worried in the past about pushing through the estate tax exemption level, you need to consider what it could mean to your operation now. You've invested in your operation by buying land, machinery, grain bins, irrigation and making other improvements. You've worked to improve your business strategy and practices. So you might be closer to that exemption level than you think – possibly leaving your operation exposed to estate taxes. And when that happens, you're hurting the future of the farm with the next generation. They may not be able to pay those taxes without selling off assets. Sadly, selling off assets can mean a large part of their livelihood is gone.
A good legacy plan can help you be sure that doesn't happen. Having a gradual transition – of both the assets and the management responsibilities in the operation – brings everything together and gives all the generations who are involved peace of mind.
In most farming operations today, there's a lot going on – and a lot of different pieces to deal with. Getting a plan in writing keeps everything going if something tragic or unexpected were to happen to a key player.
You've built a farm business that you're proud to own. Now it's time to pay it forward with a plan to pass it – all of it – to the next generation.