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Farming is complex, and it makes sense that the plan to move it to the next operator, whether they are family or not, is going to be complex as well. “Dying well” is hard to do, even in a non-farming context, when you must also balance competing interests between your children who may all want your stuff.

We recommend that a complex plan with business interests, also intertwined with family concerns, be an open plan. If the plan is open knowledge, then the children and business partner children can make plans for the future.

Having disclosures in place for who can understand the plan and look at it can yield beneficial results to your family for generations.

Consider the difference between:

A:   A farming daughter who keeps a war chest of cash and liquid assets on hand to buy out her siblings when mom and dad die because she has no idea what the plan is post death for the acres she currently crop shares with her parents. 

B:   A farming son who knows he has a buy/sell agreement, and a first right of rents on ground that he and his non-farming sibling are both part beneficiaries on.

A forty-acre tract lies between these two operations. At auction, which operation is likely to expand, take risks, and grow, and which one is likely to continue to mold?

An office practice that has been beneficial is to bring the clients and children in (no in laws) for a “work through” of the parents established estate plans. The children get some idea now of what the plan is and it cuts against undue influence concerns when the client is still alive and confirming the plan.

A Warm Hand Now or a Cold Hand from the Grave.

What makes sense from a planning stand point may not make sense on a grander scale. Giving in contemplation of death or decline with the grim reaper on the door step is not a great plan. Giving away well in advance can be part of a well-organized estate plan.

Gifts are tricky to accomplish effectively. They are required to be made at a point when the client is willing to let go of the asset and the control associated with it.  Most people hang on to assets well past when it is appropriate to consider giving them away.

Some of the considerations that should be contemplated before enacting a gift plan are:

*        Impact on Medicaid eligibility.

*        Realistic fair market value.

*        Encumbrances against property.

*        Impact on basis. Retained basis.

*        Expected value increases.

*        Capital gains: $250,000 exclusion for a single person ($500,000 for married couple) for primary principle residence.

*        Gift tax.

*        Intent of recipient, and is that recipient reliable.

*        Family impact.

*        Loss of control. A gift is a gift.

Estate planning for a farm operation can be difficult to discuss with loved ones; however, they will be thankful you did as it will be one less burden your family will have to deal with after you are gone. If you are ready to plan for your future, and your family’s future, set up an appointment today to discuss how we can help you make this process easier.



Friday, October 30, 2020
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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