- April 13, 2025
- Kelvin Birk
- Estate Planning
No one likes to contemplate their death, so many farmers and ranchers make the mistake of failing to even make an estate plan. But farming or ranching is more than a means of livelihood – it is about preserving a legacy and unique way of life. Unfortunately, without an estate plan, the farm or ranch that has been passed down for generations ends up being sold and converted into non-agricultural use, cutting the legacy short and ending the family’s unique lifestyle choice.
Farmers and ranchers are not the only ones who avoid making or updating an estate plan – many others, including business owners and parents, also avoid planning, which can cut their legacy short. It is far better to handle these matters now, when you are of sound mind and able to do so, to ensure your farm, ranch, and other assets are protected, your family is provided for, and your end-of-life wishes are honored. In the case of your death or serious illness, it is essential to have formal estate planning documents that meet the requirements of Missouri law to preserve your property, make the administration of your estate as simple as possible for your loved ones, and ensure your farm or ranch lives on.
A consultation with our experienced Missouri estate planning lawyer can help by ensuring that everything is done properly and that you have all the necessary documents to secure your farm or ranch, your assets and your legacy. To get started, the following are three common estate planning mistakes farmers and ranchers make that you should be aware of and advice on how to avoid them.
Mistake #1 – Failing to Plan
Farmers and ranchers have complex estate planning needs. They may have children who want to continue the farming or ranching business and children who do not. They will be forced to decide who inherits the land, the equipment, the livestock, and other assets, all the while trying to keep things fair and equal. As a result, many farmers and ranchers cannot decide what to do and end up without any estate plan at all. For others, this same circumstance can occur with the family home, rental properties, or the family business.
Estate planning involves setting down in writing how your assets will be preserved, managed, and distributed after death. It takes into account how your properties and financial obligations will be handled in the event you become incapacitated and provides ways to reduce taxes and avoid a long and expensive probate process. It allows you to name your minor children’s guardian in the event of your premature death. It minimizes the chances of family strife and ugly legal battles should individuals disagree on how your assets should be divided. It also states what you want done if you are terminally ill and allows you to determine who you want to make health decisions for you if you are no longer able to do so.
Without a clear estate plan, your assets will be distributed according to Missouri’s intestacy laws, which means the people you wish to inherit assets may not receive them. Estate planning allows you to utilize methods such as creating a will or trust, documents that specify how you want your property to be divided among your beneficiaries by addressing the distribution of land, equipment, livestock, and other assets. In addition, your estate plan should include the following:
- Durable Power of Attorney: This legal document authorizes someone to make financial decisions on your behalf in the event of your incapacity.
- Durable Power of Attorney for Health Care and Advance Health Care Directive (living will): These documents appoint someone to make medical decisions for you if you’re unable to make them on your own, and they state your end-of-life wishes on your medical treatment when there is no expectation of your recovery from a terminal illness or injury and you are unable to communicate.
- Beneficiary Designations: You should designate the beneficiaries for assets such as your life insurance policies, bank and brokerage accounts, retirement accounts, and certain other assets. Your designated beneficiaries get them after your death and they do not have to go through probate.
There are many estate planning options available to farmers, ranchers, and others that will allow you to fulfill your ultimate goals. No matter your occupation or asset mix, it is a good idea to work with a team of experts (including attorneys, accountants, bankers, insurance specialists, and financial advisors) who are familiar with the nuances of estate planning to ensure that your estate plan will work as anticipated when it is needed.
Mistake #2 – Relying on Joint Ownership
Many people, including farmers, ranchers, and others, believe that the easiest way to plan their estates and avoid probate is to own property in joint names with family members. However, farmland or ranch property that is jointly owned and enrolled in programs administered by the U.S. Department of Agriculture may result in subsidies’ being left on the table. Aside from this, joint ownership causes you to give up control of your real estate. Unlike other planning options, joint ownership may not be easy to change, since “undoing” joint ownership can have significant costs and tax implications.
For example, should you place your wife or child on your land deed and equipment titles, and a divorce occurs, these assets will be subject to division. The assets will also be subject to any current or future creditors or judgments that they might have. In addition, adding your child to a deed while you are alive often results in high income tax consequences and the need to file a gift tax return.
It is a better option to hold real estate in the name of a business entity (corporation, partnership, or limited liability company) or a trust. This will allow you, whether you’re a farmer or rancher, to maximize subsidies, minimize liability, and retain control.
Mistake #3 – Overlooking Liquidity Needs
Incapacity and death are expensive and often require cash to pay expenses. But, farmland, farming equipment, personal residences, automobiles, and other personal effects are illiquid, and cash flow is affected by forces such as drought, flooding, wind, and market and seasonal fluctuations. Without proper planning for immediate and long-term cash needs, families will be forced to quickly sell land and equipment for pennies on the dollar.
Farmers, ranchers, and others have several options to choose from when creating a plan to manage debt and expenses after incapacity or death. Financial advisors, bankers, and insurance professionals can assist with securing lines of credit and the proper amount of disability insurance, long-term care insurance, and life insurance. Attorneys can assist by helping you create wills and other estate planning documents, creating life insurance trusts, business entities, and other more complex strategies like part gift/part sale arrangements in exchange for a note or private annuity.
Help is Available for Estate Planning for Farmers and Ranchers
Farmers and ranchers live a different lifestyle and require specialized estate planning solutions. But they’re not alone – everyone from business owners to parents has unique planning needs. A team of advisors, including attorneys, accountants, bankers, insurance professionals, and financial advisors, can assist you in creating and maintaining a plan that will preserve your legacy and unique way of life.
Birk Law Firm is experienced with supporting farmers, ranchers, and other business owners in achieving their estate planning goals. Please call Birk Law Firm if you have any questions about this type of planning and to arrange for a consultation. Kelvin Birk will utilize his dual expertise as an attorney and CPA and his farming knowledge to work with you to create the best estate plan for you and your family.
Call us today at 573-332-8585 to see how we can help.
Attorney Kelvin Birk
Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]
