The question of transferring farmland ownership while preserving familial enjoyment—like hunting or camping—is a common one, and a Charitable Remainder Trust (CRT) can indeed be a powerful tool to achieve this balance. While seemingly counterintuitive—selling land to a charity—a CRT allows landowners to receive income from the sale, potentially avoid significant capital gains taxes, and still maintain some level of access to the property. This is particularly appealing for farmland owners who have strong emotional ties to their land but recognize the financial benefits of selling it. According to the National Agricultural Law Center, approximately 27% of U.S. farmland is expected to change hands in the next decade, making estate and transfer planning increasingly important for these families. A CRT isn’t about giving the land *away*; it’s about restructuring ownership to achieve multiple goals.
What are the tax benefits of using a CRT for farmland?
The primary tax benefit of a CRT lies in the ability to defer—and potentially reduce—capital gains taxes. When farmland is sold outright, the owner typically owes capital gains tax on the difference between the sale price and the original cost basis. However, with a CRT, the landowner transfers the property to the trust, and the trust then sells it. The landowner receives an income stream from the trust for a specified period (or for life), and the remainder goes to a designated charity. This structure allows the landowner to take an immediate income tax deduction for the present value of the remainder interest—the portion of the property that will eventually go to charity. Furthermore, any capital gains tax is deferred until the income is actually received, potentially allowing the landowner to spread the tax burden over many years. In 2023, the maximum long-term capital gains tax rate was 20%, but with careful planning, a CRT can help minimize this impact.
How does a CRT impact family access to the farmland?
This is where the arrangement gets nuanced. A CRT *does not automatically* guarantee family access. The initial sale is to the charity, and the terms of access must be carefully negotiated and written into a “retained life estate” or a separate lease agreement with the charitable beneficiary. It’s vital to specify exactly what activities are permitted (hunting, camping, hiking) and for whom (immediate family, extended family). This requires working with an attorney who understands both estate planning *and* agricultural law. One family I worked with, the Millers, owned a 100-acre farm passed down through generations. They wanted to ensure their grandchildren could continue to hunt deer on the land. We structured a CRT with a detailed lease agreement allowing for limited hunting access during specific seasons, ensuring the charity understood and respected these terms. Without that clearly defined access, the charitable organization might not be inclined to allow it, leading to disappointment and conflict.
What went wrong for the Hanson family and their farmland?
The Hanson family—let’s call them that to protect their privacy—thought they had a simple solution. They created a CRT but neglected to detail any provisions for continued family access to their 80-acre farm. They assumed the charity—a local conservation group—would be amenable to allowing them to continue their annual family camping trip. Unfortunately, the charity had other plans. They immediately leased the land to a commercial hunting operation, effectively excluding the Hanson family. There was no legal recourse, and the Hansons were heartbroken. The oversight—the failure to secure a written agreement—cost them a cherished tradition. This story illustrates the critical importance of addressing access issues explicitly when establishing a CRT. It wasn’t that the charity was malicious; it simply prioritized its own objectives, and the Hansons hadn’t protected their interests.
How did the Carter family benefit from a well-structured CRT?
The Carter family, facing similar circumstances, learned from the Hanson’s experience. They consulted with Steve Bliss and his team to create a CRT that not only addressed their tax concerns but also guaranteed their continued enjoyment of their 150-acre farm. We drafted a comprehensive agreement that allowed the Carters—and their descendants—to hunt, fish, and camp on a designated portion of the land for the remainder of their lives. The CRT also included provisions for regular inspections and maintenance of the land, ensuring its long-term preservation. The arrangement was mutually beneficial: the Carters received a steady income stream, the charity received a valuable asset, and the land remained a cherished family gathering place. “It’s not just about the money,” Mr. Carter told me. “It’s about leaving a legacy—both financial and emotional—for our children and grandchildren.” The key to their success was meticulous planning and a commitment to clear, legally binding documentation.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
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Feel free to ask Attorney Steve Bliss about: “What should I know about jointly owned property and estate planning?” Or “Can I avoid probate altogether?” or “What is a successor trustee and what do they do? and even: “What should I avoid doing before filing for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.