BLOOMINGTON – Planning ahead now could save headaches down the road.
Estate planning remains the same for those owning farmland or with a farming operation with one of the biggest goals including trying to avoid probate.
“When someone passes away, probate is that court process that sometimes has to be used to transfer assets from the person’s estate to their heirs or whoever they name in their will or trust,” explained Chad Ritchie, attorney and owner of Ritchie Law Office in Bloomington.
This process can take a year to get through so the first important thing is to evaluate assets. In Illinois, if an estate is over $4 million, that is subject to the Illinois estate tax. The federal estate tax is much higher at $11.5 million.
“If you own farmland at $9,000-$10,000 an acre, whatever it is, that adds greatly to net worth which can potentially impact estate taxes,” Ritchie said.
Ritchie looks closely at that $4 million threshold to see if there is a need for any type of estate planning. Farmers typically need a plan for avoiding probate because equipment and other types of farm-related assets would generally go through probate.
The next big question involves how to transfer assets to the next generation. The goal is to treat all of the heirs as fairly as possible per the client’s wishes.
“Farming families that I talk with have specific kids that are going to take over those farming operations and sometimes they don’t have anybody that is going to take over,” said Ritchie.
As the older generation passes away, those in agriculture must figure out how farming will be sustained for the next generation. It is very expensive to get into farming – if not impossible – unless you have family already involved or inherit a farm or machinery.
“If you have farm equipment that is part of your estate, will the person farming receive a discount as far as the valuations for that equipment as opposed to their siblings or others that would inherit who are not farming?”
This may not make everything equal but it is fair based on the risks the farming person will take.
Ritchie also has advice for non-farmers: organize your assets in a way that would avoid probate. Be sure any beneficiary designations are updated such as on bank accounts, life insurance or brokerage accounts.
“I think everybody knows they should have their estate planning done,” Ritchie added. “It’s always on the list but it’s number five or six on the list rather than one or two.”
More information can be found at www.ritchielawoffice.com or by calling 309-662-7000.