Estate Planning Strategies for Illinois Farmers

 Posted on October 17,2024 in Estate Planning

The Illinois Farm Bureau is seeking to help farm owners leave their farms to family members without incurring huge estate tax bills. While the Illinois Farm Bureau's proposed request was not included in the budget passed by the Illinois legislature in June 2024, the IFB director says it will continue fighting for passage of the legislation during the November veto session. 

Although there was money in the state’s budget to pay for the Farm Family Preservation Act, there was a fear that the legislation would also open the door for other industries to ask for changes. The Farm Family Preservation Act would have raised the family farm estate tax threshold from $4 million to $6 million, making only the dollars over $6 million have an estate tax attached.

At present, when an estate reaches the $4 million threshold, the entire worth is taxed at the Illinois state estate tax rate of 12 percent to 16 percent. This means that for a farm valued at $5 million, the family could owe $600,000 or more in state estate tax before anything could be distributed to the estate heirs. The goal of the IFB is to allow family farms to stay in the family and produce food for our nation rather than be sold to pay taxes.

Regardless of whether the proposed IFB plan passes in November, the need for estate planning is significantly increased when you own a farm. The ownership of your farm will one day transfer to a family member or members or could be sold to benefit heirs. Speaking to a Cook County, IL estate planning attorney from Whitacre & Stefanczuk LTD can help ensure you are prepared for the future.

Succession Planning Considerations for Farmers

Farmers face unique challenges when it comes to estate planning, even though smart estate planning can help smooth the transition of farm ownership and management from generation to generation. Succession planning is a key consideration for those whose goal is to hand his or her farm over to one or more heirs.

If you plan on passing your farm to a single heir, you must choose someone who is capable and interested in the business of agriculture. Clear communication with your chosen heir and solid legal documentation can outline expectations and responsibilities.  If you are planning farm succession with multiple heirs, estate planning, while more complex, is even more important.

It could be beneficial to divide the farm into separate parcels, establish a family trust, or create a co-ownership agreement. If there is no clear successor to your farm, estate planning may require more strategic solutions if you want to preserve its agricultural use. You may choose to lease the farm to another farmer or sell it to a trusted individual or organization.    

Additional Estate Planning Considerations for Illinois Farmers

In addition to planning for ownership of the land, many other assets are essential to your farm's continued agricultural operation, including livestock and machinery. Without farm machinery, most farms would be unable to function, and both machinery and livestock are significant investments.

You may choose to pass farm machinery and livestock to a designated heir or heirs, with established guidelines for maintaining the equipment and the health of the livestock. If you do not have a chosen successor, you could have the livestock, feed, and machinery sold to support other aspects of your estate plan.

Some trusts and other tools will remove property from your probate estate, minimizing estate taxes. You might also choose to use payable-on-death accounts, transfer-on-death deeds, life insurance with a named beneficiary rather than the estate, and revocable or irrevocable living trusts to minimize or avoid probate.

Contact a DuPage County, IL Estate Planning Lawyer

If you are struggling to determine how to plan for the eventual succession or sale of your family farm, a Cook County, IL estate planning attorney from Whitacre & Stefanczuk LTD can help. We are highly experienced and very communicative with our clients because we want them to trust and feel comfortable with us. Attorney Daniel Stefanczuk is active in the Polish Community and speaks fluent Polish. Call 773-622-6100 to schedule your free consultation to discuss your estate planning needs.