Estate and Transition Planning

By: Robert Moore, Friday, August 11th, 2023

Legal Groundwork

On July 26, 2023, Representatives Jimmy Panetta of California and Mike Kelly of Pennsylvania introduced legislation related to farm estate taxes.  The proposed bill seeks to increase the limit on the deduction that can be taken by farmers under Section 2032A of the Internal Revenue Code (IRC).  The 2032A provision in the IRC allows farmers to value their land at agricultural value, rather than fair market value.  However, the current law limits the deduction to $1.16 million.  This relatively small deduction can limit the usefulness of 2032A for some farm estates.

Consider the following example:

Farmer’s estate includes 500 acres with a fair market value of $5,000,000.  The agricultural value, allowed by 2032A, is $4,500/acre or $2,250,000.  The difference between the fair market value and the agricultural value is $2,725,000.  So, by using 2032A valuation, the land value can be reduced by $2,725,000.  However, 2032A limits the deduction to $1,160,000.  Therefore, Farmer’s estate can actually use less than ½ the reduction in land value.

The newly introduced legislation would increase the 2032A deduction limit to the federal estate tax exemption, currently $12,900,000.  Applying the proposed legislation to the above scenario, Farmer’s estate would be able to deduct the entire $2,725,000. 

The farm value of farmland is determined by a formula included in the IRC.  The value is the net cash rent of comparable land less real estate taxes divided by the Farm Credit System Bank interest rate, which is 4.57% for a 2022 Ohio estate.  Let’s assume the fair market cash rent for a farm is $220/acre less $50/acre for taxes.  Dividing by the interest rate, we get a value of $3,720/acre.  The 2032A rate (farm value) is usually 1/3 to ½ of the fair market value.

If we use the $3,720 as the farm value and $10,000/acre for fair market value, 2032A reduces the value of the farmland by $6,280/acre.  Dividing the per acre savings into the 2032A limit of $1,160,000 results in 185 acres.  So, a reasonable estimate is that the 2032A limit only allows farmers to apply the 2032A special valuation to about 185 acres (assuming $220 rent and $10,000 FMV).  Conversely, if the 2032A limit is increased to $12,900,000, the farm value could be used on over 2,000 acres.  Increasing the 2032A exemption limit to $12,900,000 could save as much as $4,696,000 in estate taxes for some farm estate.

It is important to note that 2032A is only needed by farmers whose estate value will exceed the federal estate tax limit.  For example, a farmer that died today with a net worth of $12,900,000 or less would owe no estate tax and thus would not need to take the 2032A deduction.  According to the USDA, of the approximately 31,000 principal farm operators who died in 2020, only 50 (0.16%) owed estate taxes.  With the current high estate tax exemption, less than 1% of farmers owe federal estate taxes and thus the 2032A limit is not an issue for the vast majority of farmers.

Unfortunately, this could change soon. In 2026, the federal estate tax exemption is scheduled to be reduced to around $7,500,000.  We will not know the exact number until 2026 because of adjustment for inflation, but it will be somewhere around ½ of what it is now.  Congress can extend the current, higher exemption or make it permanent, but no one seems to know the likelihood of that happening at this point.  If the federal estate tax exemption does come back down in 2026, and with the increases in land prices the last few years, 2032A may become needed by many more farm estates.

Let’s take a look at how 2032A would play out in 2026. Consider the following scenario:

Farmer dies in 2026 and the federal estate tax exemption is $7,500,000.  His net worth is $10,000,000 with $7,000,000 in farmland.  The estate is $2,500,000 over the estate tax exemption limit which would result in $1,000,000 in estate taxes.  If the 2032A exemption remains at $1,160,000, we can further reduce the estate by that amount, leaving $1,340,000 over and $536,000 of tax liability.  If the newly proposed 2032A legislation is passed, the Farmer’s estate will be able to deduct at least $2,500,000 using 2032A, leaving Farmer’s estate with $0 tax liability.

As the scenarios and discussion shows, increasing the 2032A exemption limit will help farm estates, especially if the estate tax exemption is reduced in 2026.  The proposed legislation has been introduced in the prior two Congresses and both times did not make it out of the House Ways and Means Committee.  We will keep you updated on the status of this legislation and if it begins to make its way through Congress.

Posted In: Estate and Transition Planning
Tags: 2032A, estate taxes
Comments: 0
By: Robert Moore, Tuesday, August 01st, 2023

Legal Groundwork

A common misperception is that all trusts protect assets from creditors, lawsuits, and nursing homes.  While some trusts do protect assets, many trusts do not.  In fact, most trusts are not designed to protect assets but instead to only transfer assets at death.  Knowing the difference between the different types of trusts is important to ensure that your trust meets your expectations for asset protection.

There are generally two different types of trusts – revocable and irrevocable.  A revocable trust is the typical estate planning trust most people use.  Because the revocable trust can be changed and assets transferred into and out of the trust, it provides no asset protection.  Essentially, if the owner/grantor can access the assets of the trust, then so can creditors.  If you can make changes to your trust and transfer assets in and out of the trust, you probably have a revocable trust.

An irrevocable trust can protect assets.  The concept of an irrevocable trust is to establish a trust that cannot be changed (with a few exceptions), transfer assets to the trust and then relinquish the right to withdraw the assets back out of the trust.  Additionally, someone else serves as the trustee to manage the trust assets.  Since the original owner of the assets no longer has access, control, or ownership of the assets, then creditors cannot access them.

It is important to keep in mind the five-year lookback rule for Medicaid.  This rule causes ineligibility for Medicaid for gifts that were made within five years of Medicaid application.  Due to this rule, establishing an irrevocable trust to protect assets from nursing home costs must be done well before the assets become at risk.

While an irrevocable trust is useful to protect assets, the irrevocable nature of the trust is a significant negative feature.  Once the irrevocable trust is established and the assets transferred, it cannot usually be undone.  Even if circumstances or goals change over time, the irrevocable trust stays in place and the assets stay in the trust.  A revocable trust, on the other hand, is flexible and can be changed as circumstances and goals change.

Sometimes a trust will include “revocable” or “irrevocable” in its name, making it obvious the type of trust.  However, many trusts do not indicate in the name if it is revocable or irrevocable.  In that case, the trust document must be reviewed to determine the type of trust.  Typically, within the first few paragraphs of the trust document, the trust will be clearly identified as either revocable or irrevocable.

Some estate plans include both a revocable and irrevocable trust.  Assets to be protected are transferred to an irrevocable trust and assets the owner wishes to retain control over are transferred to a revocable trust.  Having two trusts increase the costs of both setup and administration but it is an option for many people.

Anyone with a trust should verify the type of trust they have.  It is common that someone believes their assets are protected by their trust only to find out too late that they actually have a revocable trust and their assets are subject to nursing home costs.  A revocable trust can be converted to an irrevocable trust at any time prior to death.  If there is any doubt as the type of trust, review the trust with your attorney to be sure it meets your estate planning and asset protection goals.

By: Robert Moore, Friday, July 21st, 2023

Legal Groundwork

Registration is still open for Cultivating Connections, a conference for farm transition planners.  The conference will take place in Des Moines on August 7th and August 8th.  An online option is also available.  The program is a cooperative effort between OSU’s Agricultural and Resource Law Program and Iowa State’s Center for Agricultural Law and Taxation.  The goal of the conference is to increase the number of skilled professionals assisting farmers with farm transition planning. Additionally, a network of colleagues for connection during the year through online meetings, webinars, newsletters, and other opportunities will be established.

More information and registration details are available at . Contact Robert Moore ( with any questions.

By: Robert Moore, Thursday, July 20th, 2023

Legal Groundwork

Revocable trusts are an important estate planning tool that is utilized in many estate plans.  Most assets can be held in a revocable trust but there are exceptions.  One such exception is retirement accounts like an IRA, 401k or 403b.  These types of accounts should not be owned by a trust and a trust should only be the beneficiary in limited circumstances.

A qualified retirement account can only be owned by an individual.  There are many rules and restrictions related to changing the ownership of a retirement account.  If you transfer a retirement account to your trust, there will likely be penalties assessed and income tax due.  Do not transfer ownership of your retirement account without consulting your tax advisor and financial advisor.  Generally, transferring a retirement account to a trust is not advised.

A trust can be made the beneficiary of a retirement account but, again, caution should be used.  Trusts usually pay higher income tax rates than individuals.  Also, it is often easier for an individual to manage an inherited retirement account than it is for a trustee to manage a retirement account on behalf of a trust.  So, it is usually best to have retirement accounts inherited directly by the beneficiaries rather than be held in trust for beneficiaries.

There are times when naming your trust as the beneficiary of a retirement account is appropriate.  The potential for higher taxes and more cumbersome administration can be offset if the retirement accounts should be managed by the trustee due to concerns with the beneficiaries.  Some situations that might justify using a trust as a retirement account beneficiary include minors as beneficiaries, concerns with marriage of beneficiary, the beneficiary’s inability to manage assets and providing creditor protection.  Particularly when a retirement account may involve large amounts of money and concerns about the beneficiary, naming the trust as the beneficiary may be warranted.

In all situations, the retirement account should have at least one beneficiary named.  If no beneficiaries are named, the account will go through probate and the administration burden on the executor and trustee will be significant.  Be sure to double-check all retirement accounts to be sure a beneficiary is named.

The integration of retirement accounts in estate planning is an important component of most people’s attempt to transfer assets to the next generation.  Be sure to discuss your retirement accounts with your attorney, tax advisor and financial advisor.  Making changes to the beneficiary designations of retirement accounts is a relatively easy process but knowing whom to name as the beneficiary should include careful analysis and consultation with your advisor team.

By: Robert Moore, Thursday, July 13th, 2023

Legal Groundwork

You may have seen the news story this week about Aretha Franklin’s will.  Aretha, the famous singer, died in 2018.  A will executed in 2010 was originally thought to be her last will and the document that controlled the distribution of her assets to her heirs.  The 2010 will appears to have been a formal will, prepared by an attorney, and properly executed by Franklin.  However, a 2014 handwritten will was later found in a notebook in Franklin’s couch.  Some of the heirs of Franklin’s estate disputed the validity of the 2014 will.  The 2010 left Franklin’s home to three sons while the 2014 will left her home to only two sons.  The issue was recently resolved by a Michigan jury.  The primary issue was: can a handwritten will be a valid will?

The answer in most states, including Ohio and Michigan, is yes.  Known as a holographic will, a person can write their own will and the will can be valid provided it is signed and witnessed by two adults.  Generally, the holographic will must be in the person’s handwriting to confirm that they did, in fact, write the will themselves.  So, even a will written by hand on notebook paper found in someone’s couch, like Aretha’s will, can be valid.  Presumably, two witnesses were present when Franklin signed the handwritten deed.  A few lessons can be learned from Aretha Franklin’s situation:

  • Revoke the prior will.  When executing or updating estate planning documents, the new or updated documents should clearly revoke the prior relevant documents.  If Aretha’s 2014 will would have expressly revoked her 2010 will, the matter may not have gone to court because her intent to use her 2014 will would have been much clearer.
  • Every requirement of a will matters.  If Aretha’s will would not have been signed, it would not have been valid.  The law vigorously enforces the technical requirements of estate planning documents.  An unsigned will is typically not enforceable even if it is clear the person intended to use the will but did not sign it in error.  Aretha’s will met all the requirements of a holographic will in Michigan and was deemed valid.
  • Secure your estate planning documents in a safe location and make sure someone knows where they are.  Whether a desk drawer, safe or filing cabinet, your estate planning documents should be held in a protected location and the executor and/or heirs should be aware of the location of the document for easy access.  Also, the law firm drafting the documents usually retains a copy in their files.
  • Put a “No Contest” clause in your will.  A No Contest clause disinherits any heirs who challenge the validity of a will.  If Aretha’s 2014 will had included a No Contest clause, the son disputing the will may have not initiated the lawsuit in fear of losing his inheritance in her valuable song royalty rights.
  • Every change in an estate planning document should be a formal change.  Scratching out a line on a will or adding a provision by hand will likely not be effective.  If a change needs to be made to a document, a formal amendment should be drafted and executed or the document should be changed and re-executed.
  • Casual execution of documents can cause conflict among heirs.  Because Aretha took a more casual approach to her 2014 will, heir heirs ended up in a lawsuit and family relations are likely strained.  Have an attorney assist with your documents so that formalities are followed and conflicts among heirs are minimized.
  • Take the time to visit with an attorney for your documents.  No one likes spending money on legal fees but a modicum of legal fees preparing estate planning documents can save heirs many thousands of dollars in litigation fees.
By: Robert Moore, Tuesday, June 13th, 2023

Legal Groundwork

The OSU Agricultural and Resource Law Program is teaming up with Iowa State University and the National Agricultural Law Center to present a conference for farm transition planners.  The conference will be in held in Des Moines on August 7-8 and will focus on issues and strategies common to farm transition planners.  While the conference is geared towards attorneys and accountants working with farm clients,  other professionals, such as lenders, appraisers, Extension personnel and consultants, will also find the conference useful .

Topics for the conference include:

  • Lay of the Land from Long-time Farm Transition Planners
  • Preserving the Family Farm in the Wake of Uncertainty
  • Buy Sell Agreements – Best Practices, Tips, and Traps, Tax and Valuation Considerations
  • Preparing Clients for the Transition Plan Experience
  • Navigating the On-Farm, Off-Farm Issue
  • Fair v. Equal Treatment of Heirs
  • Charitable Options for the Transition
  • Resources for the Rural Professional
  • Working with Clients Who Can't Work Together
  • Considering Long-Term Care Needs
  • Tax Mistakes to Avoid in the Transition
  • Real World Succession Planning Scenarios

For more information and to register, go to the conference registration site.  An online participation option is also available.  

In addition to providing educational sessions, another purpose of the conference is to create an association of farm transition professionals.  This group will hold educational programs and provide support for other professionals in the farm transition planning community.  The purpose of the organization is to increase the number of skilled professionals assisting farmers with the critical work of transition planning. The goal is to link conference participants with a network of colleagues for connection during the year through online meetings, webinars, newsletters, and other opportunities.

For more information or questions, contact Robert Moore (


By: Robert Moore, Friday, June 09th, 2023

Legal Groundwork

You have probably heard of revocable trusts, irrevocable trusts, and maybe even life insurance trusts but you may not be familiar with gun trusts.  This specialty trust is sometimes used to hold and pass along restricted firearms to heirs.  Gun trusts are only useful to a small number of people who own restricted firearms, but for those people, gun trusts can be a good solution to some of the challenges of owning restricted firearms.

Gun trusts typically hold firearms that are commonly known as NFA firearms, named after the National Firearms Act and the Gun Control Act of 1968.  Every NFA firearm has a serial number and must be registered with the ATF.  NFA firearms include:

  • Fully automatic firearms
  • Short barrel shotguns
  • Short barrel rifles
  • Sound suppressors

NFA firearm owners must pay a transfer tax to the ATF, file transfer paperwork, be fingerprinted and get permission from local law enforcement to have the firearms.  It is not a simple process to own NFA firearms.

Each NFA firearm may only have one owner and must be re-registered every time ownership transfers.  These ownership and registration requirements can be problematic when NFA firearms are involved in an estate.  An executor may innocently but illegally transfer an NFA firearm to an heir due to being unfamiliar with NFA rules and the registration process to transfer the firearms can be cumbersome for the executor.  Gun trusts can help alleviate these challenges.

A gun trust has two primary advantages.  First, the trust allows multiple people to use the NFA firearms.  Without a gun trust, only one person may own and possess an NFA firearm.  By placing the firearms in a gun trust, each trustee of the trust is entitled to possess the firearm.  So, by naming multiple trustees, the one-person, one-gun rule can be skirted.  It is common to set up a gun trust with perhaps father, mother and children all being trustees to allow them all to possess the NFA firearms.

The second advantage is the firearms are not required to be transferred when someone dies.  Once the NFA firearms are initially transferred to the gun trust, the trust can continue on after the deaths of the original trustees.  The gun trust does not terminate when a trustee dies.  Rather, the gun trust continues and is managed by the surviving or successor trustees.  The firearms can be passed down through generations without having to re-register the firearms each time an owner dies.

A gun trust is a special type of trust that should be drafted by an attorney familiar with the NFA and other firearm regulations.  Also, gun trusts are not needed for firearms that are not subject to the NFA; ordinary firearms can be transferred to heirs with no registration or paperwork.  For those gun owners who do have restricted firearms, a gun trust is worth exploring.

Posted In: Estate and Transition Planning
Tags: Gun Trust
Comments: 0
By: Robert Moore, Friday, June 02nd, 2023

Legal Groundwork

The National Agricultural Law Center (NALC) is holding its 10th Annual Mid-South Agricultural and Environmental Law Conference on Thursday (June 9th) in Memphis, Tennessee.  The conference primarily addresses agricultural legal issues in the Mississippi Delta region.  Robert Moore will be providing a presentation on Long-Term Care and its impact on farming operations.  Other topics will include real estate title issues, the 2023 Farm Bill and conservation easements.  More information can be found here and an online attendance option is available.

The NALC, funded through the National Law Library, is a long-time partner with OSU’s Agricultural and Resource Law Program.  The NALC maintains resources that are understandable and available to the general public.  The Center’s website serves as a hub for research and information within the agricultural, food and environmental law field.  You can view their extensive catalogue of information at


By: Robert Moore, Friday, May 05th, 2023

Legal Groundwork

A common dilemma for many second-marriage couples is how to provide for a surviving spouse while ensuring that assets ultimately go to the deceased spouse’s children.  If the deceased spouse’s assets go to the surviving spouse, there is no guarantee that those assets will transfer to the deceased spouse’s children upon the death of the surviving spouse.  Trusts often provide a good solution to this problem.

Trusts can be used to provide income to the surviving spouse while ensuring that the assets are ultimately inherited by the deceased spouse’s children.  Because the surviving spouse will never own the assets, the surviving spouse cannot redirect to whom those assets will go.  The trust can hold the deceased spouse’s assets in trust for the surviving spouse’s life, thus providing income.  Then, at the surviving spouse’s death, the assets are distributed to the deceased spouse’s children.  Consider the following example:

Mark establishes a trust with the following provision: “Upon my death, my assets shall be held in trust for the life of my wife, Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  Upon the death of Mindy, my Trustee shall distribute the assets to my children.” 

This trust will provide income to Mindy but ultimately distribute the assets to Mark’s children.  Mark can be sure that Mindy receives income from the trust but can also be sure that his assets ultimately are inherited by his children and not Mindy or her children.  Mindy has no control over the distribution of assets at her death.

In some situations we may want some assets to go directly to the deceased spouse’s children at death and some held in trust.  This is very common for farm plans.  When children will be taking over the farming operation, we may not want to tie up the operating assets in trust but instead have those go directly to the farming children.  To implement this plan, a trust may have a provision similar to the following:

“Upon my death, my Trustee shall distribute all my farm machinery, grain, crops and other farm operating assets to my children.  The remainder of my assets, including my farmland, shall be held in trust for Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  My Trustee shall offer to lease the farmland to my children for 80% of the county cash rent average.  Upon the death of Mindy, my Trustee shall distribute all remaining trust assets to my children.”

In this example, the farm operating assets go directly to Mark’s children so that they can continue the farming operation.  The only farm asset held is trust is the land, but Mark’s children have the option to lease the land at a favorable lease rent.  This strategy avoids interfering with the farming operation while holding non-operating assets for Mindy’s benefit.  Mark has met his goal of immediately transferring farm operating assets to his children while providing for Mindy and ensuring his assets will eventually be inherited by his children.

A third scenario involving trusts and second marriages may have some assets go directly to the surviving spouse, some assets go directly to the children, and some held in trust for the surviving spouse.  It may be appropriate for some assets to go directly to the surviving spouse so that they have full control over those assets.  A trust could include the following provision:

“Upon my death, my Trustee shall distribute all my farm machinery, grain, crops and other farm operating assets to my children.  All cash, investments and life insurance shall be distributed to Mindy.  The remainder of my assets, including my farmland, shall be held in trust for Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  My Trustee shall offer to lease the farmland to my children for 80% of the county cash rent average.  Upon the death of Mindy, my Trustee shall distribute all remaining trust assets to my children.”

In this example, Mark wanted Mindy to receive some assets directly and not held in trust.    The farm operating assets are still distributed to the children immediately and the land is held in trust for Mindy’s benefit then distributed to Mark’s children at Mindy’s death.  Mark achieved his goal of having some non-farm assets go directly to Mindy, the farm operating assets go directly to his children with the remaining assets being held for Mindy’s benefit and ultimately distributed to Mark’s children.

As these examples illustrate, trusts can be very effective at establishing plans for second marriages.  The surviving spouse can be provided with adequate income while protecting the assets for the deceased spouse’s children.  A simple will-based plan or no estate plan at all can result in some or all the deceased spouse’s assets either be consumed by the surviving spouse or being inherited by the surviving spouse’s children.  A trust can be designed with a great deal of flexibility and creativity to provide a suitable farm transition plan for second-marriage situations.


Posted In: Estate and Transition Planning
Comments: 0
By: Robert Moore, Thursday, April 27th, 2023

Legal Groundwork

Under Ohio law, a spouse cannot be disinherited by a will. Through a concept known as elective share, the surviving spouse may elect to receive what is provided for in the deceased spouse’s will or receive what is provided by law.  How much the surviving spouse receives from the elective share depends on the family status of the deceased spouse.  The following is the elective share for spouses as provided by the Ohio Revised Code:

  • If the decedent (deceased spouse) died with a spouse but no descendants, the surviving spouse inherits the entire probate estate.
  • If the decedent died with a spouse, and their only descendants were also descendants of the surviving spouse, the surviving spouse inherits the entire probate estate.
  • If the decedent died with a spouse and one child who is not the child of the surviving spouse, the surviving spouse inherits the first $20,000 of the probate estate, plus half of the remaining estate. The child takes the rest.
  • If the decedent died with a spouse and multiple children who were not children of the surviving spouse, and at least one child together with the surviving spouse, the surviving spouse inherits the first $60,000 of the estate and one-third of the balance, with the descendants who were unrelated to the surviving spouse taking the rest.
  • If the decedent died with a spouse and multiple children who were not children of the surviving spouse, and no children together with the surviving spouse, the surviving spouse inherits the first $20,000 of the probate estate and one-third of the balance, with the descendants who were unrelated to the surviving spouse taking the rest.

Consider the following example as to how the elective share is applied:

Mark and Mindy each have two children from previous marriages.  Mark has farmed his entire life and built a large farming operation prior to marrying Mindy.  Mindy is not involved in the farming operation.  Mark’s two children plan to take over the farming operation.  Mark executes a Will that leaves all his assets to his children.  Mark believes the Will causes all his assets to go to his children at death.  After Mark’s death, Mindy decides to take her elective share.  Because there are multiple children from a previous marriage, Mindy will receive $20,000 plus one-third of Mark’s assets.

As the above example illustrates, Mark could not disinherit Mindy using his will.  Under Ohio law, Mindy had the right to receive assets from Mark’s estate even though he had left nothing in his will for Mindy.  The same would apply if Mark had no will at all which is called intestacy.  In intestate estates, the elective share also applies.

It should be noted that the elective share only applies to probate assets.  Assets that are disposed of through a trust[1] or a transfer/payable on death beneficiary are not subject to the elective share.  If Mark had all his assets in a trust and left nothing for Mindy, Mindy could not elect against the trust assets because they were not subject to probate jurisdiction.  Also, if Mark had his children as payable on death beneficiaries of all his financial accounts, Mindy could not make an elective share against those financial accounts either.

Due to the ability to avoid the elective share, trusts can be valuable tools in farm succession planning involving second marriages.  In the next installment, we will continue our discussion of planning with second marriages by explaining how trusts can be used to provide for the surviving spouse while ensuring the assets end up with the deceased spouse’s children.

[1] To avoid probate, assets must be titled to the trust or be titled payable/transfer on death to the trust.  Assets that must go through a “pour over” will before being transferred to the trust are subject to probate.




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