By Sister Laura Goedken
The state of Iowa has many acres of rich farmland. Are you a farmland owner? Some of the farmland in Iowa is on the market for as much as $12,000 an acre or more. In the past 10 years the value of farmland has been rising faster than ever before.
The number of people who want to remain in the family farming business is shrinking. Will your children be willing to farm your land? For many families, the answer is “no.” Transferring farmland to the next generation takes thoughtful consideration. If your children don’t want to farm the land, how might it be transferred to benefit you and them? If you gifted the land to your children, there may be significant gift tax. If they sold the land, there could be a large capital gains tax.
What are your estate plans for the family farm? Will you be giving this land to them in your estate plans? If you have more than one child, there may be ownership and managerial issues between them as to how to run the farm or whether to sell it. Capital gains taxes on the sale of a farm are always an issue.
You might want to think about alternatives. If you put the farmland in a charitable remainder trust or charitable remainder annuity, you and your children could continue to use and benefit from the land while you and they are alive. You would also be able to retain the income. You could receive a current year income tax deduction, avoid capital gains tax, and you may avoid a potential managerial problem for them. At least you could, thereby, solve the emotional and financial problems that might arise if children do not want to be farmers or if they want to sell the farm. For example, in a charitable remainder annuity trust you might name yourselves as the primary beneficiaries (who will share the lifetime income) and also name contingent beneficiaries who will receive payments after the death of the primary beneficiaries.
Also consider the good such a gift can do for your favorite charities. We hope you might think of the charities to which you now contribute. Think of the Catholic Foundation for the Diocese of Davenport, or your local parish and Catholic school. A charitable remainder trust and annuity has numerous possibilities. You may wish to speak with a wealth management agent or a qualified estate planner. For more information, contact Sister Laura Goedken, OP, at Goedken@davenportdiocese.org or (563) 888-4252.