Colorado Farm and Ranch Estate Planning
What happens to your farm when you die? The answer to that question depends on your farm estate plan.
Estate planning for farmers and ranchers is complicated. The Germany Law Firm offers peace of mind for you and your family members.
Are you protecting your Colorado family farm in the case of death? Do you have a farm survival plan in place? If you or a family member own a farm, ranch, or cabin, the time to start your succession plan is now. When you prepare an estate plan, you ensure your family business is protected after retirement and after your death.
Your Family Farm is Your Legacy
The U.S. Department of Agriculture Statistics Service (NASS) reports that family-owned farms account for 97 percent of the 2.1 million farms in the U.S. yet only 30% of these farms survive into the second generation, and only 12% are still operating by the third.
The root cause of the decline in multiple generation farms is poor estate planning. Surveys show that only 23% of family farms have a succession plan in place. Without survival planning, farms are unnecessarily losing assets and property in timely and costly probate processes.
The good news is that with a solid farm estate plan, you can protect your family’s legacy for generations to come.
Tough Conversations with Family Members
The first step to any succession/estate plan is having an uncomfortable conversation with your family about what happens after your death. Here are a few things to discuss when bringing up planning with your family:
- In the event of my death, who is going to run the farm?
- Do we want to sell the farm after death?
- Who is ready and able to take on farm operations?
Determining how the farm will run after your death is essential to your estate plan. Likewise, before speaking with an attorney, you should begin taking an inventory of all assets, properties, and land. Transparency with your family and attorney is key and ensures a smooth estate transfer process.
For a full list of estate planning conversation starters, read our Estate Planning Primer: Protecting Your Family Farm or Ranch.
Importance of Farm and Ranch Succession Planning
Preparing an estate plan ensures your farm stays in operation or is prepared for purchase or sale in the case of death. Like any estate plan, a farm, ranch, or cabin estate plan protects your properties and directs family members and personal representatives on how your business assets will be distributed after death.
The right farm estate plan can protect your business assets for generations to come. No planning, or poorly written planning, can lead to high estate taxes, confusion for family members, and even loss of family property.
Sitting down with a farm estate planning attorney ensures that you have the right plan in place. Not every attorney is knowledgeable about farms, ranches, and cabins in Colorado, so make sure you speak with an expert.
A farm, ranch, and cabin estate planning attorney can help you:
- Avoid probate after your death
- Direct your heirs on farm, ranch, or cabin operations
- Protect your assets
- Review applicable estate tax exemptions
- Avoid family drama
Preparing Your Farm, Ranch or Cabin Estate Plan
When you sit down with an estate planning attorney, you will go over an inventory of all your assets, properties, and land, and discuss how you wish to distribute the business assets after your death. Based on your income, assets, and business valuation, your attorney will determine which documents will make up your estate plan.
While every estate plan is different, there are two key documents that an estate planning attorney will likely suggest when preparing your farm succession plan:
- Last Will and Testament
- Farm Trust
Types of Trusts for Farmers and Ranchers in Colorado
A farm trust is a great way to hold and transfer your property and can protect your family farm from liability and taxation. Your attorney will help you determine the type of trust that will best protect your farm, ranch, or cabin. Some examples include:
This type of trust is created by a Will. It only becomes effective at the farmer or rancher’s death, and can be an easy way to transfer property.
A revocable trust can be used during the life and after the death of a farmer, rancher, or cabin owner. This type of trust is flexible and can be amended while you are still alive.
The flexibility of a revocable trust is attractive to families who want to transfer the trust assets to family members and make future changes to the transfer schedules.
An irrevocable trust can be used during the farmer, rancher, or cabin owner’s life. However, it cannot be changed once created and the assets cannot be reclaimed.
While irrevocable trusts are less common, they are great tools for families who need to consider special needs planning, Medicaid eligibility or are trying to avoid high estate taxes.
Don’t Wait, Prepare Your Farm Estate Plan Today
Preparing an estate plan for your Colorado family farm, ranch or cabin may seem daunting but it is the best way to ensure asset security for generations to come.
At The Germany Law Firm, we are passionate about protecting Colorado farms and ranchers. Our attorneys are available to help families create estate plans and farms to respectfully ease the transfer of assets after death.
We work with clients to protect their family legacy, and conserve their business and land for years to come.