Grain rally complicates US farmer estate planning
By Lisa Shumaker
NASHVILLE, Feb 28 (Reuters) - America's aging farmers need to take the recent rally in grain prices and soaring land values into account when deciding how to pass the family farm to the next generation, an expert said on Thursday.
"The percentage of farmers over age 65 is growing dramatically," Sara Wyant, editor of the weekly newsletter Agri-Pulse, noted at the Commodity Classic, a U.S. grain industry conference.
More than 30 percent of farmers are over age 65, up from less than 20 percent in 1978, Wyant said. She said soaring farm prices have made it necessary for growers to review wills and plans set up even just a few years ago.
Wyant felt the effects of the lack of estate planning first-hand when her grandfather died in 1966 when she was 8 years old.
"My father and his two sisters could not agree on how to dispose of the estate," she said. "There were arguments. There were hard feelings. They didn't speak for years."
Wyant said it was important for families to agree on a plan either to sell farm land or transfer it to the next generation -- and put that plan in writing.
Some farmers may need to work with lawyers and accountants to set up trusts and minimize the tax impact.
Vivian May has not updated her will since writing it 21 years ago when her first child was born. She and her husband farm 1,500 acres in Hurricane Mills, Tennessee. Her mother-in-law owns the land and there is no written plan for how to divide it among the siblings.
"It's not a topic I feel comfortable bringing up," May said. "We're going to update our will though."
Farm income has risen significantly in the past year with corn futures at the Chicago Board of Trade up 25 percent from a year ago. Soybean futures have risen 100 percent from a year ago and climbed above $15 a bushel for the first time ever.
Chicago wheat values have soared 150 percent from a year ago.
The average value of farmland in Iowa has more than doubled to $3,900 per acre from $1,857 in 2000, Wyant said.
Higher land values could push many families above the $2 million estate exception for 2008. The exemption will rise to $3.5 million in 2009 and the estate tax will be repealed in 2010. But unless Congress acts, the estate tax will return in 2011 with only a $1 million estate exemption.
"If it's not changed by 2010, we're going to have a world of hurt disposing of assets and transferring to the next generation," Wyant said.
(Editing by David Gregorio)
