The average age of farmers and landowners is the oldest in history. Farmland values are at record high levels, and it is estimated over one-third of farmland is owned by those 75 years or older. Mix all these up and it’s a recipe for a record amount of wealth to transfer hands over the next 10 to 15 years.

Are we as an industry ready for this? Are you and your estate planning in order?

Here are a few suggestions to add to your estate plan checkup list:

Ownership

Ownership is an important part of your estate planning but oftentimes it is overlooked. Make sure the ownership of your assets complements your estate planning goals.

For example, do you own your land as joint tenants or tenants-in-common? Jointly owned assets such as real estate and bank accounts may seem simple and avoid the probate process at the first death. However, is it wise to leave your entire estate to your spouse and subject it to his or her creditors? Take time to understand all your planning options which could include more proactive methods for protecting your assets while still providing the income needs of your spouse.

Probate

What is probate? Most are familiar with a will and the probate administration process to distribute assets with clear titles and free of any claims from creditors. I have worked with some who had no problems with the probate administration process. Others would tell you differently. The probate administration process can involve time delays working through the court process. It includes a probate inventory which is a matter of public record. And, administration costs from legal fees and court costs.

Do any of these concern you? Then, you should familiarize yourself with the option of creating a revocable living trust. This will distribute your assets just as a Will would, however, avoid the probate administration process. Since it’s revocable, you still own and control all your assets and can make changes as you wish.

Bank accounts

Do you have a pay on death (POD) designation set up? This will distribute the funds held in your bank accounts direct to where you designate. In absence of a POD, this may cause a probate to distribute these funds. I worked with one family where $300,000 was tied up for 18 months in probate from a bank account that did not have a POD. The court costs in this particular county are approximately $4,500 for every $1 million of estate value.

Life insurance

Life insurance and retirement accounts have beneficiary designations that distribute the funds directly to where you designate. I commonly see the spouse listed as the primary beneficiary and children as the contingent. However, this has left some estates cash poor if there isn’t any other liquidity to pay any remaining debts or legal fees. In some cases, it may be better to name your estate as the beneficiary of your life insurance to ensure it has some liquidity for such expenses.

Final distribution

More times than not successful farm transitions include more than just having a Will or a Trust. How does your farmland pass to your children? Oftentimes, the default is the children will inherit real estate equally, each owning an equal undivided interest as tenants-in-common. This is a potential pitfall long term, as with undivided interests in real estate it technically only takes one tenant-in-common owner to force a sale or partition of the farmland.

If this concerns you, become familiar with other options for passing your family farm to the next generation. More and more are restructuring ownership of farmland to family land entities if they believe it is a better ownership structure to hold the farm together for generations to come.

There is a lot more at stake under our current farmland environment and possible estate tax law changes looming at the end of 2025. Please consider giving your estate plan a checkup to ensure all your planning is in order.   

Downey has been helping farmers and landowners for the last 22 years with their family farm transition, estate planning, leasing strategies, finances, and general land consultation. He is the co-owner of Next Gen Ag Advocates and an associate of Farm Financial Strategies. Reach Mike at [email protected].