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How a Living Trust Can Help You Protect Your Family Farm

Family farms are essential to American life. People across the country depend on the food grown in our heartland. In South Dakota, family farming is a way of life, and one that should be protected for future generations. 

Several obstacles can get in the way of smooth farm succession. Federal estate tax may be based upon the value of the farm. If not properly planned for, a tax obligation may leave an heir with no choice but to sell the family farm to pay the tax bill. The same thing can happen if the owners of a farm are sued. Family farms can also face financial difficulty if one of the owners requires nursing home care.

One of the options available for protecting your family farm is a trust. Trusts are versatile planning tools and come in many forms, like a living trust.

A farm owner may manage and transfer assets within a living trust at any time while they are alive, which makes it different from a testamentary trust, which only goes into effect once the owner dies. The living trust should be part of a larger estate plan created with an estate planning attorney. Once the trust is created, the farm owner can transfer the farm, land and/or business and other property to the trust but may serve as the trustee throughout his or her lifetime.

Some questions that you should discuss with your attorney before creating a living trust are:

  • Who will be responsible for taxes, including real estate taxes, capital gains taxes, employment taxes, federal estate taxes and/or state inheritance taxes?

  • Who will control the business, make decisions on who to hire, purchase equipment and determine the day-to-day business of the farm?

  • How will profits from the operation of the farm be used?

  • How will the family members be compensated for their work on the farm?

  • How will the trust help protect the farm in case one of the beneficiaries is named as a defendant in a lawsuit?

  • Who or what company should be chosen as the successor trustee, to take over when the trust creator passes away?

  • What will change, if anything, in operation of the trust and farm when the trust creator passes away?

Here at the law firm of Anker Law Group, P.C., we understand the interests of South Dakota family farmers. We would be happy to sit down with you to learn about your wishes for your family farm and suggest legal tools to best accomplish your goals. To schedule a consultation at our offices in Rapid City, call us at 605-519-5967 or contact us online.

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  • Rapid City Office

    Address

    1301 West Omaha Street
    Suite 207
    Rapid City, South Dakota 57701