Running and operating a family farm requires a commitment that few people are willing to undergo. Whether you’re raising livestock, growing small grains or producing vegetables, nature doesn’t take your plans into account. The long-term goals for your farm could take years, if not decades, to implement. This means that if you want your work to be continued according to your wishes, you need someone to carry on that work. You want your years of hard labor and careful planning to be passed along to your children and heirs in the most efficient way possible.
Protecting your assets with an estate plan
Creating a well-balanced estate plan can be crucial to maintaining a farm in perpetuity for your family. Here are some of the estate complexities that farmers should take into account when drafting an estate plan:
Capital gains tax: Unfortunately, the result of a well-run farm and the appreciated value of a property will increase your capital gains tax. If you sell a property and business, the capital gains tax will be applied to the realized gain from that sale. Property that is transferred via inheritance may not necessarily be considered taxable income.
Estate tax: Though Indiana doesn’t levy an estate tax, an estate’s value can make that property qualified for federal estate taxes.
Trusts: There are various trusts that a farm owner can use to pass that property along to those named in the trust. An irrevocable trust is a useful tool for providing the owner with some flexibility and access to those assets during their life.
Planning for the future of a farm
The strategy and planning that needs to go into a legacy farm, which you hope will be passed down across generations, is a very different task than preparing a property to be sold in anticipation of your retirement. If you want to solidify your farm for posterity, you must need to include a good estate plan in your strategy.