Three Estate Planning Mistakes Farmers and Ranchers Make (And How to Avoid Them)

Farming and ranching aren’t just jobs; they are about preserving a legacy and a way of life.

Unfortunately, many farmers and ranchers fail to create a comprehensive estate plan, or sometimes, any plan at all. Without a proper plan, the family farm or ranch that has been passed down for generations can end up being sold, converted to non-agricultural use, and cutting a family’s legacy short.

Here are three of the most common mistakes farmers and ranchers make, and how you can avoid them.

Mistake #1: Failing to Plan

As a farmer or rancher, you have distinct estate planning needs. You have to consider complex questions:

Because the decisions are so difficult, it’s common to get stuck and end up doing nothing at all.

Which children want to continue the business, and which do not?
How do you divide land, equipment, livestock, and other property, all while keeping things fair and equal?

How to Avoid It: To preserve what you've built, you need a team of experts. This includes attorneys, accountants, bankers, insurance specialists, and financial advisors who are familiar with the nuances of farming or ranching legacies. They can help you explore the many estate planning options available to fulfill your goals.

Mistake #2: Relying on Joint Ownership

You may believe that the easiest way to avoid probate is to simply own your property jointly with your loved ones. However, this can have serious, unintended consequences.

Transferring property this way causes you to give up total control. A joint owner can make decisions without your knowledge, and “undoing” the joint ownership can have significant tax implications and costs.

The risks are significant:

Loss of Subsidies: Jointly owned farmland may result in subsidies from USDA programs being left on the table.
Loss of Control: A joint owner can withdraw money from an account or even prevent you from selling the property if they disagree.
Creditor Risk: Your co-owner’s creditors may be able to go after your jointly owned accounts and property.

How to Avoid It: A better option is to hold real estate in the name of a business entity (like a corporation, partnership, or LLC) or a trust. These methods allow you to minimize liability and retain control.

Mistake #3: Overlooking Liquidity Needs

Incapacity (the inability to manage your affairs) and death are expensive. Money is needed to pay for expenses, but farm assets are illiquid—farmland and farming equipment are not easily converted to cash.

Without planning for these immediate and long-term cash needs, your family may be forced to quickly sell land and equipment for pennies on the dollar just to cover the bills.

How to Avoid It: You have several options to plan for these cash needs. Financial advisors, bankers, and insurance professionals can help secure: * Lines of credit * Disability insurance * Long-term care insurance * Life insurance. Attorneys can also assist by creating specialized tools like life insurance trusts or business entities to manage these situations.

🛡️ Final Thoughts: Protect Your Legacy

We understand that farmers and ranchers require specialized estate planning solutions. A team of advisors—including attorneys, accountants, bankers, and financial advisors—can help you create and maintain a plan that preserves your legacy and unique way of life.

Our firm is experienced in supporting farmers and ranchers with achieving their estate planning goals. Please call our office if you have any questions about this type of planning and to arrange for a consultation.