Estate Planning for Farmers in the Jerseyville, IL Area
Estate planning is a lot more important for family-farm owners in Jerseyville, IL compared to small business owners. Unlike any small business, a farm owner does not have the easy option to move. That farmland is also valuable and typically you will see operations simply being passed down to new “heirs”. The distribution of assets is important so that way the new farm owners don’t end up co-owning any of the same assets. Land value, however, makes this difficult. Most farm owners will pass their farm down to their children if they are interested, but not all the children may be interested in farming. There’s also the possibility the farm owners do have not children, but they want to keep the land because it is sentimental to them. There are thankfully some options for this.
Estate Planning Requires Trust Arrangements
The key to estate planning is to transfer the land to a trust. This trust can take effect either after the owners of the farm have died or it can take effect during their lifetime. Trusts give the owners options on how they want to distribute the land to their heirs and how they want that land to be used.
Leasing the Property Between Children
A trust could allow the owner’s parents to decide on how they want to divide and let their children use the land. This usually is not an issue if they only have one child, but when there are multiple children and the parents want to be fair with all the children, they can divide the land and use it up for them however they see fit. Not all the children are going to want to live on the land or farm, so trusts can be a good way to keep things fair.
Estate Planning By Doing a Third-Party Rentals
If there are no children who are willing to take the land and do not care about farming, the parents could instead have the farmland in a trust with someone else who can lease out their land for agriculture. Those third parties would pay rent into the trust and whoever the trust beneficiary would be, possibly the children if there is any, would receive a distribution of that rental income.
Use and Sale Restrictions and First Refusal Rights
Trusts can be set up so the land cannot be sold for an amount of time, but not forever. This can be done even if no family members are farming the land. This is helpful in case you have a grandchild who may want to take the land when they are ready. You can also have trusts set up to control the purposes of the land. It’s possible to only allow the land to be used for agriculture.
Estate Planning By Transferring to A Limited-Liability Company
There is also the option to transfer the farmland over to a limited liability company (LLC). This is similar to a trust in the sense that it allows the original owners of the land to create a set of rules for the land that must be followed. The children of the owners would get membership interests in the LLC which work like stock benefits. There would be a written agreement that would establish a management system and prevent giving interest to third parties. Unlike a trust, even when owners transfer their land to an LLC, they still own an asset. They can transfer that asset at any point even at death.