Sep 22, 2014
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Farm Estate and Succession Planning

RSS By: Andrew Zenk

This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.

Andy is an Agribusiness Consultant for AgCountry Farm Credit Services, Fargo N.D., a farmer owned cooperative and part of the Farm Credit System serving eastern North Dakota and northwest and west central Minnesota.

Q&A on Family Limited Liability Limited Partnerships

Jan 07, 2012


Continuing with the previous posting, this information will address a variety of issues regarding the use of a family limited liability limited partnership (“FLLLP.”) Remember, every state has its own specific laws and every plan is different so it is crucial to make sure this fits your plan.  Here are some answers to “practical” questions with using a FLLLP and farming. 
1)            “Mom and dad”, as general partners, can decide to rent the land in the partnership to anyone they wanted.
a.    Generally, the FLLLP would rent the land to your farming operation. 
b.    If Mom and dad owned a limited partnership interest in the FLLLP, they could also, as separate individual farmers, rent the land from the FLLLP.
2)            What would happen when either or both mom and dad died?
a.    Here it is crucial that your estate plan is updated so that the shares of the entity are transferred as you want.
b.    Assuming their plan stated that the general partnership ownership and the remaining Limited Partnership interests ownership would go to their children (needs to be set up in Mom and dad’s Wills), then there be no problems with your children either continuing or dissolving the FLLLP at that time, and each taking their respective 50% of the land in their own individual names.
3)            What happens if 5 years down the road, you decide to dissolve the FLLLP. 
a.    In this instance all owners of the FLLLP (mom and dad, respectively) would take their respective shares of the partnership. This means that the land would come out of the FLLLP and into your individual names. As long as you did not sell the land at that point, it would be a non-taxable event. 
b.    Remember, if shares are gifted to children, or sons / daugthers in law, and the entity is later dissolved, their share of the land based on their gifted ownership of the FLLLP goes to THEM; not revert back to mom and dad as the original givers. 
The next posting will talk about some benefits and consequences to gifting the shares of a FLLLP. 

Disclaimer: The information contained in this publication provides a general overview on various topics and is strictly for informational purposes only. The reader should consult a qualified professional for advice based on his/her specific circumstances. AgCountry Farm Credit Services and the writer of this blog make no representations as to the accuracy or completeness of any information on this site or found by following any link on this site, and shall not be liable for any errors or omissions herein or for any losses or damages resulting from the display or use of this information. 
Required Disclosure Pursuant to IRS Circular 230: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code; or (2) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.
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