A farmer doesn’t start selecting tools in the machine shop before diagnosing the problem with machinery, and you shouldn’t do it for farm succession and estate planning either.
Once a farmer and his or her advisers have diagnosed the problems arising from the default settings, an attorney can help select tools to fix those problems.
Most farmers probably wouldn’t choose a chainsaw to fix a broken-down tractor. But would they choose a trust, a land contract or a conservation easement for their estate plan? What if it worked well for the neighbor? Or for mom and dad?
With the tractor, you might be thinking, “Well, I probably wouldn’t use a chainsaw ... but what exactly is wrong with the tractor?” A farmer doesn’t start selecting tools in the machine shop before diagnosing the problem with machinery, and you shouldn’t do it for farm succession and estate planning either.
How can a farmer diagnose where the "problems" are in a farm succession plan? On the technical side of things, it’s helpful to begin with the “default settings.” What happens to your assets if you don’t have a plan? If you don’t have an estate plan when you pass away, the law will provide one for you – i.e., the default settings.
Interstate distribution
Each state has passed a law that identifies your heirs and distributes your assets between them. If you do not make a plan and decide on distribution, then state law will make those decisions for you.
Probate
Probate is the state court process for administering an estate. It includes appointing a personal representative (also sometimes called an executor) if you hadn’t identified one, inventorying assets owned at death, paying off creditors and distributing the remaining assets to heirs.
Typically, there are fees for probate, including court filing fees, attorneys’ fees and sometimes an administrative fee. For example, in Wisconsin, estates pay courts an additional fee equal to 0.2% of the assets subject to administration. Remember, if no planning has been done, this might be all assets. Each state has different fees, so farmers should ask their attorney to explain the potential costs for probate in their state.
Probate can also be time-consuming, typically lasting at least six months and sometimes several years. During the probate process, the personal representative is responsible for managing and preserving the assets for all heirs, meaning that the assets may not be available to an on-farm heir to use for farming or as collateral during that time period.
Probate is also usually a public process, meaning that anyone could go down to the courthouse and pull the case file, including the asset inventory, valuation and final distribution.
One benefit of probate is that the process usually sets a limit on creditors, requiring that they bring any claims against the estate within a certain time frame, or they may be barred in the future.
When talking to your attorney or adviser, you can ask, “How does this plan impact probate?”
Estate tax
The federal estate tax ranges from 18% to 40%, but each person also has an estate and gift tax credit. This credit works like the standard deduction for income tax, reducing the amount of your estate that might be subject to estate tax.
In 2025, this credit is $13.99 million per person, meaning that if you pass away, you can pass $13.99 million of assets before any estate tax will be due. If you are married, you and your spouse each have a credit, and you can elect to use any unused portion of your spouse’s credit, a concept called “portability,” allowing you to essentially double your total credit.
Keep in mind that lifetime gifts may "use up" part of your credit. Each year, you have a gift tax exclusion. In 2025, the annual gift tax exclusion is $19,000. Gifts below that threshold do not impact your unified estate and gift tax credit. However, if your total annual gifts to any one person exceed the exclusion, then that excess is deducted from your credit.
For example, if you give $20,000 to your son, then $1,000 will need to be deducted from your $13.99 million credit. However, if you give $19,000 to your son and $19,000 to your daughter, there’s no impact to your $13.99 million credit. The annual gift exclusion applies per recipient per year, whereas the estate and gift tax credit applies per giver throughout their lifetime.
To complicate matters further, both the unified estate and gift tax credit and the annual gift tax exclusion are adjusted annually for inflation. In addition, the $13.99 million credit is a product of the Tax Cuts and Jobs Act of 2018, which is set to sunset at the end of this year, returning the credit to approximately $6.98 million per person in 2026. This may change if Congress decides to extend the higher estate and gift tax credit.
When talking to your attorney or adviser, you might say, “My net worth is approximately $[blank]. I think estate tax is a risk for me. How does this plan impact estate tax?” Keep in mind that your state may also have a state-level estate tax to assess and consider.
Long-term care and retirement
If you do not have a plan, we can usually assume that you may need to use your income and assets to pay for your retirement and long-term care. Nationally, the average annual cost of care ranges from $75,500 for in-home care to $127,750 for a private room in a nursing home. While the need for long-term care will range from person to person, the U.S. Department of Health and Human Services estimates that people on average need about three years of long-term care services.
They indicate on average that women need 3.7 years of care, while men need 2.2 years of care. If using income or assets to fund these needs is not appealing, then you may wish to explore tools that address this concern.
When talking to your attorney or adviser, you might say, “My long-term care or retirement plan is [blank]. How will this plan use my assets for or protect my assets from long-term care needs?
Once a farmer and his or her advisers have diagnosed the problems arising from the default settings, an attorney can help select tools to fix those problems. If you choose a tool first, you may be "fixing" something that’s not a problem or choosing a tool that isn’t quite right for the job. Instead, identify the problems, then select possible tools and strategies, and finally compare consequences.
Farm succession and estate planning are complicated processes, but with careful diagnosis of potential problems as you begin the technical work, you can avoid choosing a chainsaw when a screwdriver would do.
