Estate planning in the agricultural sector: a tax law perspective

Abstract

Within the agricultural sector, estate planning is often inadequately understood and frequently avoided due to the unique complexities and emotional conflicts that arise from it. This lack of estate planning frequently results in the failure to preserve the farmland and farming operations for future generations, which undermines the long-term goal of the individual farmer to pass the farming enterprise on to future generations. Therefore, there is a significant need for carefully considered estate planning options in the agricultural sector. This study examines the use of a company and a trust as estate planning tools for individual farmers, as well as the methods that can be utilised to transfer ownership of farm assets to a company and/or a trust. A company and a trust are two distinct entities that help ensure the protection and preservation of farm assets as well as the future of the farming enterprise. Taxation is an essential aspect to consider when doing estate planning and it is an inevitable component of farming. Therefore, the study further analyses the relevant tax implications that arise when estate planning is conducted for the individual farmer. A company and a trust serve as estate planning tools, and the methods used to transfer ownership of farm assets to these tools are subject to different tax implications. The tax consequences play a crucial role in determining which estate planning tool is most appropriate for the individual farmer. In conclusion, it was established that an appropriate estate plan for an individual farmer comprises the use of a company and a trust structured together, to effectively achieve the estate planning objectives.