Irrevocable Trust may also be best for a profi table or highly appreciat- ing asset or business. There is no income tax on the sale of the farm or ranch and no income tax on note payments. Davie and Lashmet advise farm,
From 2002 to 2012:
ranch and landowners to discuss the various succession strategies with their heirs and individual fi nancial and legal advisors. “More people want to make sure everything is in order,” Davie says. “They need to look at managing their assets on a cross-discipline basis. Legal mat- ters, accounting and fi nancing and other aspects are all intertwined. Such a comprehensive plan often requires expertise from an outside party.” There can be numerous circumstances that can
Number of principal owners age 34 or younger
decreased 2.6% Land owned by beginning producers decreased 20.9%
Number of principal owners age 65 and older
increased 25.7% Land owned by operators 65 and older increased 19.4% U.S. Agriculture Census statistics
Land values have taken major turns in recent years,
impact farm succession plans, especially if a widow or widower remarries. “Some families want to keep the ranch within the bloodline and exclude a divorced owner’s new spouse’s children from participating,” Davie says. Lashmet explains that a prenuptial agreement will
assist in assuring that surviving children or other blood relatives receive their inheritance in the event of the widow or widower’s death. “It may be that a solid succession and estate plan will help, or it could be that selecting the right business entity and owner- ship structure will cover all bases,” she says. Davie points out that outside fi nancial planning
experts can help farm or ranch owners examine their situation on a cross discipline basis. “Legal, accounting, insurance, all those things are intertwined,” she says.
With more farm and ranch ownership by those 65 and older, more operations will face farm or ranch transfer deci- sions sooner rather than later.
Estate taxes can create problems when a transfer
occurs. “There is a lot of net worth in land value,” Da- vie says. “That can push heirs into an unfair estate tax situation. They may have to sell assets to pay the taxes.”
tscra.org
especially where there has been extended oil and gas exploration. For example, during the peak for oil prices, landowners in the Eagle Ford area in South Texas faced escalated land values even if they didn’t have explora- tion or production on their land. “They had to do some planning to prevent their children from facing large tax obligations after their death,” Davie says. Extension farm management specialists at Purdue
University advise producers to use a step-by-step check- list when planning for farm or ranch succession. The list should include: • Gather information and ideas and discover expec- tations.
• Generate, examine and evaluate the options. • Make preliminary decisions and check with legal and fi nancial experts.
• Decide on a plan, then develop it. • Implement the plan. Lashmet says a plan should be re-examined often
to determine if changes are needed. “The bottom line is that farm or ranch owners must think through these issues, discuss them with their families and seek advice from accountants, fi nancial advisers and attorneys,” she says. “Families work too hard and invest far too much time, money, blood, sweat and tears not to en- sure that their operation is protected from unforeseen events in the future.” For more on farm and ranch succession and the need
for good communications, visit http://lincolnagservices. com/menu/home-action, or
http://amarillo.tamu.edu/ facultystaff/tiffany-dowell-lashmet.
December 2016 The Cattleman 77
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