Protect the Farm

Fortunately, with careful farm protection planning, you can keep the farm safe and in the family. At AlerStallings, we know the importance of the family farm, and we have worked with many farmers to protect their farms.

Estate Taxes

Many Ohio families have farmland that has been in the family for generations. Title is often transferred as an inheritance to the next generation. In the past, the biggest threat to keeping the farm in the family was the estate tax. Thankfully, the Federal Estate Tax exemption in 2019 is $11.4 million, and Ohio does not have an estate tax.

Long-term Care Costs

Today, the biggest threat to family farms is the cost of long-term care. Nursing home care can cost over $10,000 per month in Ohio. Those considerable costs quickly exhaust the average family’s savings. When they turn to the Medicaid program for help, they find that the farm has to be sold before any financial help occurs.

Medicaid has complex financial qualification rules. In addition, Medicaid Estate Recovery in Ohio seeks to recover for benefits paid. Medicaid Estate Recovery allows liens to be placed on real estate, including farmland. These liens regularly exceed $100,000 and dramatically affect the ability of a family to pass on a family farm to the next generation.   In many cases, the farm has to be sold to pay off the lien.

To protect the farm, a change ownership from the current generation to the younger generation needs to be completed at least 5 years before a long-term care crisis.  In the past, farmland was simply transferred directly to children.  Today, the risk of divorce, financial issues, and dysfunction with children (and in-laws), has pushed parents to seek another option to an outright transfer of ownership. In addition, simply transferring property to the children often creates a capital gains tax bomb in the future.

Asset Protection Trust Planning

At AlerStallings, the Heritage Trust has become the preferred method of protecting the family farm. Title to the farm can be transferred to this irrevocable trust and protected from Medicaid Estate Recovery. The trust also provides protection from the risks associated with children’s lives, such as divorce or creditor issues. The children take title to the farm only upon the death of the parents. The parents continue to live at the farm, while the trust still allows for the sale of the property to a child or other person if necessary, and provides advantageous capital gains treatment of the farm in the future.

If you have a family farm that you want to protect, contact AlerStallings to assist you in creating such a trust.