Michigan is abundant with farmland and, in many cases, these lands are cultivated by family farming businesses. Often, the family will have built their farming business from the ground up and will want to see it continue for generations to come. While this seems like a natural progression, estate planning for family farms can present challenges. As a family begins to prepare for the future of their farming business, there are certain key aspects to keep in mind.
An important consideration with planning for any family business is who in the family will be involved in the business in the future. It may be that all family members agree about keeping the business operational and staying involved in its management. However, when families run a business together it is common for there to be conflicts between members concerning who will be in charge of certain aspects of the business and how it should be run going forward. Identifying the key players and duties of the family members will be critical to planning for the farm’s future. From there it is possible to plan for the business’s management and draft agreements concerning future operations. Further, knowing which family members will be involved before the farm is passed, will provide the family time to begin the transition.
When leaving a family farm to heirs it is also critical to consider ways in which the farm may be transferred to the next generation with minimal tax consequences. Fortunately, there are options which will allow for a family business to be passed to family without being considered as part of the decedent’s estate. For some, a joint tenancy with right of survivorship may be good choice. This allows families to co-own assets during life and for the surviving co-owners to receive their share of an asset when another co-owner dies. The asset will not be considered part of the deceased person’s estate. Another choice may be to set up a family limited liability company or corporation to hold the assets. This business structure can serve to protect the family farm from a family member’s interest being taken due to outside circumstances such as their unexpected death or marriage dissolution. Another solution may involve different types of trusts.
Planning for an estate which includes a family farm requires a great deal of forethought and preparation. With careful planning, you will be able to prepare for the future of your family farm in a way that protects the business you have worked to build and creates future security for your family. As you prepare, it will be important to work together with your family and with the advice of an experienced estate planning attorney.
Our office has experienced attorneys who can help you examine your options and plan for the future of your family. Please contact us online or by phone at (517) 548-7400 in Livingston County and (586) 751-0779 in Macomb County if we may be of assistance.