How to Plan for Appreciating Farmland

May 6, 2014. Farmland is especially challenging to plan around. One of the reasons for this is the perennial question of how to treat the children and still preserve the farm. We’ve covered that before, and it’s difficult (though LLCs can help). Another dilemma accompanies the rising price of farm land. In the last decade prices have increased dramatically. Around Iowa and Nebraska, prices have gone up between 250% and 350%. Take a look at the stats from Iowa State University’s Extension HERE. From 2003 to 2013, the average price for an acre shot up. Which will make you think: if this creates a problem, it is a problem to have. But what is the problem? As we get closer to the federal tax exemption amount, we have to decide are we going to use our federal tax exemption or the marital deduction. If we think the value of the land will increase further (not implausible) and we have a lot of land (again, not implausible) we may want to freeze the value of the land by moving it out of the surviving spouse’s estate. But if we are still under the exemption, and perhaps the land’s value doesn't fluctuate much in the short term, we don’t want to miss out on a valuable step up in basis. It gets more complicated when we are dealing with a single owner or a widowed owner facing a similar question of moving appreciating property out of the estate. The federal exemption is currently generous, but the percentage increase in its size the last decade has been outpaced by the appreciation of farm land in the Midwest. The crux is it is good to see our Midwest roots prospering, but it does bring an obligation to do some very careful planning.

For more information about estate planning and how to plan for appreciating farmland, contact the Goosmann Trust Law Counsel at info@goosmannlaw.com or call 712-226-4000.

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