Quote for the Day

From the article “Communicating an Estate Plan to Heirs,” posted at Successful Farming at Agriculture.com:

“For some children, money equals love. Therefore, if they receive fewer dollars, they assume they are loved less. With farm distribution, there are times when the farming heir appears to get a financial advantage on paper. Sometimes this may be very legitimate if the farming heir has worked hard and helped to grow the farm. Other times, the truth is that person has just hung around waiting for the farm to fall into his or her lap. Know the difference and be honest with that in your planning, and it will be much easier to explain to all.”

Water, Water, Clean Water Act, Everywhere

The key paragraph from an article discussing recent oral arguments at the Supreme Court on the Clean Water Act, a case called U.S. Army Corps of Eng’rs v. Hawkes Co., Inc:

“The oral argument focused on whether the Corps jurisdictional determination meets the second condition of the Supreme Court’s test for identifying final agency action in Bennett v. Spear, 520 U.S. 154 (1997) – namely, whether the agency action determines rights or obligations or gives rise to legal consequences. Malcolm Stewart of the Department of Justice argued that the Corp’s opinion regarding whether certain land contains jurisdictional waters does not constitute final agency action because “it does not order any person to do or refrain from doing anything and does not alter anyone’s legal rights and obligations.” Several members of the Court appeared unconvinced, questioning whether the Corps treats the jurisdictional determination as binding. Mr. Stewart argued the determination is not binding on the landowner, who is free to disregard the Corps’ view and conduct the dredging activities. Chief Justice Roberts noted such course of action would be “a great practical risk.” Mr. Stewart responded that the other alternative is for the landowner to seek a permit. Justice Ginsburg replied that the permit process is “very arduous and very expensive.” Justice Breyer later summed up the alternatives:

One, spend $150,000 to try to get an exception and fail, or two, do nothing, violate it, and possibly go to prison. Those sound like important legal consequences that flow from an order that, in respect to the Agency, is final, for it has nothing left to do about that interpretation. And [] is perfectly suited for review in the courts.”

This case bears watching, given its implications for any and every farm and ranch with a puddle within its fences.

By the way, if you’re interested in listening to the oral argument in this case, go to Oyez.org, the place for watching, er, listening to the Supreme Court in action. I count it as one of life’s little pleasures.

Just Say So


Sometimes feel confused? Wonder why the left hand can’t understand what the right hand is supposed to be doing? Imagine what your family will feel like the day after you’ve passed on to the great beyond, then think about how a well-drafted trust might clear things up for them.

I’ve written more than a few blog posts about trusts, about the legal elements necessary for a trust to be enforced, about five reasons you may need  a trust, about decanting as a way to correct or improve a trust, about how trusts are an effective way to handle the issues that come with blending families, about using trusts to plan for disability, about the all-important funding step in the process of establishing a trust, and on and on. But it wasn’t until I was reading someone else’s blog post when it hit me (maybe because the writer kept repeating it): if you want something to happen when you die, just say so. Just speak your mind. Tell your loved ones what you want to happen. Tell them who gets what and why. Don’t hold your piece. Tell them now.

In essence, that’s what a well-drafted trust does. Tells them now, so they’re not confused later, so what you want to happen–happens.

Just say so. If you fail to do that before you die, life will get pretty complicated for your loved ones after you die. Trust me.

Quote for the Day

“Family business succession planning is the cornerstone of any successful family business owner’s estate plan. As is often the case, however, planning for the inter-generational transfer of ownership and control of the business becomes complicated by the intra-generational conflicts of the business owner’s heirs. These onflicts among members of the second generation, if severe enough, can render the effective management of the business by the second generation virtually impossible, leading to a loss in productivity and profitability with a resulting decline in the enterprise’s value.”

Michael V. Bourland and Dustin G. Willey, “Setting the Stage for Planning with the Family Business Owner: Tax-Free Division,” ALI CLE Estate Planning Course Materials Journal, April 2015.

Conservation Easements: Go Big or Go Home

Briefly, creating a conservation easement can allow you to receive good by doing good. Consider creating one on your  property to protect

“natural, scenic, or open space values of [that] real property, assuring its availability for agricultural, forest, recreational or open space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archeological or cultural aspects of real property”

HeartMt_431511_10150848522799638_729014637_12580484_639413481_nand you might receive a variety of tax benefits, including a reduction in property taxes and a charitable deduction that can be carried forward on future tax returns, among other things. For a farmer or rancher, the easement can have the added benefit of ensuring the farm or ranch stays in the family, because, according to G. Bruce Chilcott and Erin Johnson,

“with most or all of the development potential given away in the easement, the next generation doesn’t have the usual incentive to sell or develop [the property] in a residential or commercial manner.” (Long-Term Planning Issues for Farm and Ranch Owners, Wealth Counsel Quarterly)

The steps to create one are outlined in the Utah and Wyoming state codes and are not particularly hard to follow. But, Chilcott and Johnson caution, don’t go the cheap route. Get it done correctly. In particular, they say,

“In creating a conservation easement, the key to achieving the desired tax benefits is the appraisal. This is no place to skimp on costs or quality, and the appraiser must have special qualifications and significant experience in this arena.”

Make sure you choose an appraiser with a good track record regarding farm and ranch appraisals for conservation easement purposes because “the quality of the appraisal can be instrumental in getting the eventual approval of the department of revenue.”

Quote for the Day

On the impact of the business structure of a farm on federal farm payment limitations:

The structuring question also influences eligibility for the federal farm program payment limitation. Under the Federal Agriculture Improvement and Reform (FAIR) Act, of 1996 and earlier legislation, each “person” under one or more production flexibility contracts is eligible for a maximum of $40,000 in federal farm program payments. The payment limitation was eased in 2000. Thus, a key issue any time the farm or ranch business is restructured is determining who will qualify as a separate “person,” and whether different types of entities qualify as their own separate “person.”

McEowen and Hart, “The Law of the Land: Fundamentals of Agricultural Law,” (2002)


Farmers 1, Insurer 0

Insurer Must Provide Defense for Farms Accused of Spraying Pesticide on Neighbor.

Two key paragraphs:

Rejecting an insurer’s arguments that multiple exclusions operated to preclude coverage, a Florida federal court judge ruled that two farms are entitled to a defense for a lawsuit accusing them of spraying pesticide on a neighboring farm.


The order was not a total victory for the insureds, however, as the court said the duty to indemnify remains unresolved, leaving an award for attorneys’ fees and costs incurred in defense of the declaratory action premature. The judge denied the motion for those attorneys’ fees and costs without prejudice, allowing the sugar farms to renew their request later in the litigation.

Quote for the Day

Actually, this is not a quote but a paraphrase of some information I found the other day on the Internet. Can’t remember the source–I think I may have found it on Farm Bureau website and repeated in a variety of other places, including a Nationwide Insurance brochure I discovered online. With that, this:

Almost 97% of farms in the U.S. are owned by families, and only 11% of those families have succession or transitions plans in place to ensure that the farm stays in family hands after the current owner dies.

It’s Always Fun to Read About Uncle Sam Losing In Tax Court

United States Tax CourtThat happened in the Estate of Purdue case decided on December 28, 2015–less than three months ago. And you can read a brief summary of why in the instructively titled article Attention to How Your Farm Business is Organized Pays Off for the Heirs at Tax Time.

Bottom line, a family limited liability company formed with 1. important non-tax purposes in mind and 2. appropriate attention to the legal niceties of of running such a company paid off in big tax savings for the Purdue family. As the court’s opinion demonstrates, it’s not easy, but it can be done. Families whose net worth is tied up largely in small, closely held business or family farms or ranches should take note.

Quote for the Day

Farm and ranch estate planning and business planning involve countless choices and numerous wrenching decisions but none that ranks with pursuing fairness between and among the heirs.10 In almost every situation where it is planned for the farm or ranch business to continue into the next generation, and it appears that there will be both on farm heirs and off-farm heirs, the issue of fairness is paramount if one of the objectives of the parents as property owners is to assure harmony within the family after the deaths of the parents.

Neil E. Harl, Farm and Ranch Estate (and Business) Planning–Part 1, Farms and Ranches, March 2015

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