When establishing a succession plan, it is important to understand the plan will need ongoing maintenance, so that it works when you need it.
Some items that need to be maintained on a regular basis include the following:
- Lease agreements. If you operate your farm through an entity and rent the farmland from your trust or estate, or if you hold your land in a separate entity, you will need to maintain the lease agreements for the farmland on a regular basis.
- Annual minutes. If you operate the farm through an entity or hold your land in an entity, it is important to show that you are properly running and operating the entity. One way to show this is to hold annual meetings, and note these meetings with a call and waiver and minutes.
- Funding assets. Keeping assets properly funded is key to ensuring the succession plan will run smoothly. I recommend that funding should be reviewed on an annual basis to make sure all assets are held in the manner intended.
- Family and personal changes. If there have been changes in the family, or your personal objectives have changed since the plan was established, these should be addressed with amendments and restatements to the plan.
- Review of changes in the law. Are there laws that have changed, or potentially will change, that affect your plan? Keeping up on these changes will help keep the plan working. These may include changes to tax laws; Medicaid and medical assistance rules; the trust code; probate laws. and laws relating to LLCs, corporations and partnerships.
Current examples of changes to review include the following:
1. The federal estate tax exemption. The federal estate tax exemption is currently set at $12.06 million per individual. This is set to reduce back to $5 million (adjusted for inflation) as of Jan. 1, 2026. There are planning opportunities to use the higher exemption, before it is reduced, through gift plans that transfer assets. This could be done in a manner that maintains your overall succession plan.
2. Revisions to the Minnesota Medical Assistance laws. These revisions provide new opportunities to use irrevocable trusts. These trusts could be used to transfer assets.
3. Proposed revisions to the SECURE Act. These proposed revisions change the rules for distributing retirement accounts to future beneficiaries. These proposals should be watched to see if these will affect estate plans.
Balzarini is an attorney at law with Miller Legal Strategic Planning Centers, a division of Hellmuth & Johnson. Email your questions and comments to [email protected].