If your family has a strong tie to the land, you may intend to pass your property on to the next generation. Whether you grow crops for human consumption, produce commodity crops, graze livestock or farm trees, the land that you own is the crucial part of your family’s identity and legacy.
If you inherited a parcel that once belonged to your parents and possibly many other prior generations of your family, you probably want to protect that land so that it passes on to your children and then your grandchildren.
Many issues, ranging from you or one of your family members getting divorced to major estate taxes, could affect your family’s ownership of the land. Thankfully, there is a relatively straightforward way for you to limit the risk to your farmland.
Transfer the ownership of your real estate into a trust
The simplest way to protect your acreage and other real estate holdings from the implications of estate taxation or a divorce is to not hold title to the property.
When you own the property directly, it is subject to taxation when it passes on to your family members if the value of the land is high enough. Your spouse can also claim partial ownership of the property if you get divorced. The same is true if you share ownership with your children or pass it on to them and then they divorce.
By creating a trust to hold the title to your land, you can potentially eliminate estate taxation on the property because it doesn’t pass as an inheritance from one generation to the next. Instead, the beneficiary of the trust or the person administering the trust changes. Additionally, if an individual does not directly own the farm or land, a spouse will have a harder time laying claim to the property itself or even its value during a litigious divorce.
It’s always best to plan before the need arises
If you wait too long to start planning where to move your property in a trust, you may not reap all of the possible benefits.
For example, creating a trust to protect the land from creditors or Medicaid recovery close to the time when you need benefits might leave the property vulnerable to claim. Moving real estate into a trust after someone gets married might be too late to protect the property.
Having the foresight to plan now for things that may only occur years down the road can help protect your property for the next generation.