As harvest wraps up, what's on your mind? Your answer might depend on where you're at in your farming career. If you're toward the latter half or so of your career, you probably have some different concerns than those who are closer to the start.
A big concern for those later in their farming careers is the fact that land values are still high. It's going to take a plan to manage things like gifting or transferring land to the next generation. That will make the difference between the operations that transfer the whole farm to the next generation – and those that struggle or even have to sell off assets to pay the tax bill.
We recently talked with a farmer in his 70s. He said he wants to retire soon and transfer the operation to his farming sons. He's done very well in his farming career – he owns a substantial amount of ground and owes very little on it. He's built his operation in a very responsible way and wants to pass that legacy on to his sons.
He thought the transition of his land would go smoothly – because of the relatively small percentage of debt on it. His plan was to purchase enough life insurance to cover what he still owes on the land. He thought that would give his sons the best opportunity to continue to grow the operation by buying land.
So he was surprised to learn that he's actually going to have an estate tax problem – or, actually, that his sons would get a substantial tax bill if he were to pass away now. He said he hadn't realized that.
With high land values, the ground he owns is worth somewhere upwards of $20 million. Even with the estate tax exemption, a large part of this will still be left exposed.
After harvest, he wants to take a closer look at his situation and make some plans to address it. He'll be meeting with one of our legacy advisors to get a plan in place. A legacy advisor works with your accountant and attorney to figure out a plan that makes sense for you and your operation. They dive deep into your particular situation and create a targeted strategy to address the heart of the problem.
The farmer thought he was taking proactive action around his estate plan by buying more life insurance. But with the large amount of land that he owns, that additional life insurance was like putting a band-aid on a broken arm. Sure, you're taking action, but it doesn't fix the real problem.
Are you in a similar situation? Or do you know someone who might be (maybe it's your dad, or grandpa)? You need a proactive plan and strategy. Otherwise, the next generation could end up losing part of the farm – maybe even a substantial piece of it – that you worked so hard to build. You can help ensure that won't happen to your family.