A farm’s succession plan is complex. And with ever-changing laws and family dynamics, it can be hard to make sure everything gets taken care of in the process. Kansas attorney Jim Angell recently joined the Top Producer podcast to share four things you should consider for your operation’s transition.
1. Trusts For Gifting
The IRS Lifetime Gift Tax Exemption is currently $13.6 million, but there’s speculation that limit could be cut in half in 2026. If you’re going to be gifting a considerable amount before the end of next year, there are two types of trusts he recommends putting in place.
“We might use an entity, an LLC or Limited Partnership, and do some transfer gifting on that,” Angell says. “Or, we could use what’s called an Intentially Defective Trust. That allows you to maintain the income at the first level, freeze the assets and pass those on to the next generation. We use that quite a bit.”
2. Include Your CPA
Angell says your CPA is a more valuable asset in this process than you may think.
“One of the first things I do is if I don’t have the CPA in the first meeting, I make darn sure the CPA is in the second meeting,” he says. “The clients are out there grinding, surviving, and doing what they do best on the farm. The CPA professionals have a much better understanding [of the overall finances] generally, and so we rely on them very heavily in doing the advanced tax planning.”
3. There’s No Such Thing As One Size Fits All Succession Planning
It’s important to remember fair isn’t always equal, especially in situations with on-farm and off-farm children.
“We’ve got to find a way to keep the farm intact and transition it potentially to to the farming child, but at the same time be fair to the remaining heirs,” Angell says. “That farming child may end up with more equity, but they’re going to end up with a bigger challenge of the debt, worrying about drought, making the operation work, taking the risk and taking the lower return. So, when you really step back and look at it, if you’re looking at it economically, some of these children that are getting less value after the estate is fully settled are really better off in the short run.”
4. Set Up Protection From Unintended Beneficiaries
In some situations, a parent will remarry after the other passes away. Angell says it’s important to make sure this doesn’t have an unfortunate outcome for the farm children.
“Most estate plans, especially the larger ones, are going to need some protections built in there for at least a certain portion of those assets being held in an irrevocable trust upon the first death,” he says. “We try to push a pre-nuptual agreement and get the kids involved in for when dad does decide to remarry. Those situations can potentially tear families apart and the farm apart.”
