Estate planning is done to preserve assets in the future. It is not usually good estate practice to preserve assets in the future while costing the client income in the present. The following scenarios are very common in the farming sector.
The simplest example is that of a husband and wife who are farmland owners or farmtenant. If the husband and wife are partners in a general partnership then each will be eligible for a full payment limit for whatever program in which they are participating. If the husband and wife are simply joint landowners, each is eligible for a payment. If, however, the estate planner does away with the general partnership and in its place creates an LLC, corporation or trust in which both the husband and wife have an interest, he has reduced the eligibility of the husband and wife to one payment limit. If he takes land either jointly owned by the spouses, or owned separately by the spouses and places that land in a joint trust or LLC or corporation he has reduced the eligibility of the spouses to one payment limit.
Another common example is family members who jointly own land that is eligible to be enrolled in a Conservation Reserve Program. There is enough land to draw $150,000.00 annually from the program and we assume there are at least three joint owners. If the family members maintain their joint ownership or transfer the land to a general partnership in which each owns an equal share, they will each be able to draw $50,000.00. If, however, this land is placed in an LLC, corporation or trust, the eligibility will reduced to $50,000.00.
A third example is two brothers farming in a general partnership. They decide to enroll the land they are farming in CSP. There is enough land enrolled to qualify for an $80,000.00 CSP payment. If they maintain the general partnership, the partnership will receive $80,000.00, if, however this partnership is replaced with an LLC, corporation or trust, the farming operation will only qualify for $40,000.00.
The examples can go on and on, each with its own nuances. CountryLawyer can help you and your family with estate planning that is very precise to your specific needs. Please give us a call.