A Farm Family’s Multi-Generational Planning

By Arthur Littlefield, MBA
Farm Succession and Estate Planning Specialist
Lincoln Financial Advisors Agribusiness Services

While attending a Midwestern Ag Association show in 2014, I met George, a siblings.

A few years prior, George’s parents had engaged a local attorney to create estate documents to ensure their wealth transfer objectives were carried out. Under current law, their estate would not be subjected to federal or state estate taxes. Like many farm families, based upon the attorney’s recommendation, Wills were utilized instead of Revocable Trusts. George and Judy, his wife, were surprised to learn that the public disclosure of the parents’ wealth, process delays, and expenses of Probate could be avoided with Trusts. In addition, proper Trusts would have provided asset protection benefitting George, his siblings, and future generations. The protection is from:

  • Divorce;
  • Creditors;
  • Bankruptcy;
  • Lawsuits; and
  • Future generations paying estate taxes.

Unfortunately, George’s parents are now unable to execute Trusts so their Wills, for which there is no “work around”, must be used.

As might be expected, the parcels of land, which George has been farming for decades, will be divided between George and his non-farm siblings. A major concern is the Wills did not contain language to allow George to continue to farm the land until his retirement in about 12 years. To eliminate this potential problem, a Farm Lease Agreement was signed between George and his siblings requiring the payment cash rent. Otherwise, the siblings could have sold the land which would have left George in a difficult situation.

Regarding George and Judy, new Revocable Trusts and ancillary documents improved their situation. To fully benefit from them, the ownership of individually and jointly owned assets was transferred to the appropriate Trusts.

Ownership of the farming operation and equipment was transferred to a newly created LLC in order to minimize the personal liability of George and Judy. For further protection, the same level of farm liability insurance remained in place.

Our team was able to identify and interview local estate planning specialists as opposed to the normal method of “working with someone in town” or “getting a name from a friend”. As we saw earlier, those methods did not work well for George’s parents. A relationship has been created with a new team of legal professionals and they are now receiving advice based upon their current circumstances and desired goals and objectives.

Lastly, a family member’s experience with long term care and the expense caused them to mention a concern during our initial meeting. The financial modeling showed there were plenty of assets to maintain George and Judy’s current lifestyle for decades. Long Term Care (LTC) protection had replaced a previous need for life insurance. The cash value in their existing life policies was transferred tax-free to acquire LTC coverage.

The end result of our work together was a customized and strategic wealth management and farm succession plan that was fully implemented including the execution of all appropriate documents. This farm family and future generations will benefit from the investment of time and money.

Arthur Littlefield is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances. CRN-2804011-103019