CGA Law News & Blog

Estate Planning for Farm Families Part 1: Entities

access_time Posted on: May 7th, 2024

From Attorney Tim Bupp, chair of the CGA Law Firm Estate Law practice group.

In this biweekly column, Attorney Tim Bupp shares with you lessons and perspectives from his twenty-five years as an estate planner with CGA Law Firm.

Farm owners and farm families face unique challenges related to their estate planning.  The focus is often on ensuring that the next-generation farmer or farmers can stay in farming and that the non-farming family members are treated fairly and equitably while the parents ensure that their future holds a safe and secure retirement.  These often competing goals can create tension in finding an action plan for family and business succession.  Fortunately, a number of tools can be used to assist a farm family in achieving their goals.   

1.        Keep Assets Safe through Entity Planning.   Most CPAs working with farm families will recommend using an entity such as a limited liability company (“LLC”) in farm planning for tax reasons.  Their advice is usually that, among other reasons, expenses and deductions taken on tax returns for the farm business are more defendable when clearly identified as expenses of the entity.  Of course, another reason, and often the primary reason, for utilizing an entity in business planning is to separate the business assets from the business owner’s personal assets in order to protect the personal assets from the liabilities of the business.  This is especially true in farm business planning, where farming can be a labor-intensive and dangerous activity.  We can help you with entity planning for your farm business. 

2.        Protecting the Next Generation.  An entity is also a useful way to allocate the interest in the farm among a number of people.  Traditionally, a corporation or limited liability company divides ownership interest in the business between various members, in particular proportions, allowing, for example, parents to allocate some portion of the business to children who do not actually work in the farm business so that those children receive some appropriate inheritance from the parents.  At the same time, a company can also divide decision-making among its members, for example, assuring that the farmer-member has the authority to steer and control the business, while non-farmer members participate in the profit of the business appropriately, without interfering with the good function of the business.  I have witnessed such relationships operating successfully, and often we utilize a mechanism such as a buy-sell agreement to act as a relief valve should the members disagree or to assist in passing the family business to successive generations.  

3.        Protecting the Farm.  The farm family’s largest and most important asset is often the farm ground itself.  Without the farm, the enterprise is an entirely different operation, and therefore, steps to protect the farm from liability are important.   Assuring that the farm business is in an appropriate entity can insulate the farm from liability from the business.  Instead of one person or family owning a farm, business, and personal assets all in one “basket,” entities can separate and insulate the assets to protect them from loss.  A leasehold arrangement can also be utilized to protect the farm from loss.  And, of course, insurance can be an essential means of liability protection; I don’t sell insurance, but I certainly recognize its importance in the farm estate plan.  

There are several ways to protect the family farm, and farm families should discuss them with planners who have experience in farm business planning to ensure that farming remains strong and viable for the next generation.  

Tim Bupp has practiced for twenty-five years with CGA Law Firm in estate planning, estate administration, and elder law. Tim is an Accredited Estate Planner (AEP) by the American Association of Estate Planning Councils and a Certified Elder Law Attorney (CELA) by the National Association of Elder Law Attorneys. He is certified in Estate Planning and Pension Law Planning by the Temple University Beasley School of Law, from which he also holds a Master of Laws degree in Tax Law. He also holds a JD from the Pennsylvania State University Dickinson School of Law, an MBA from York College of Pennsylvania, and a Bachelor of Science degree from Penn State. Tim has chaired the Estate Law Section of CGA Law Firm for ten years, where he is a shareholder.  Reach Tim at [email protected] or 717.848.4900. 

CGA Law Firm Attorney Tim Bupp

Timothy Bupp

Estate Law Chair, Shareholder

Timothy J. Bupp is a Shareholder with CGA Law Firm and chairs the Firm’s Estate Law Section. He provides clients with specialized advice in Estate Planning, Business and tax planning, Real Estate transactions and related matters. Tim assists his clients by utilizing the knowledge he gained from his advanced degrees in business administration, business taxation, and law, as well as his certifications in estate planning and employee benefits taxation.

Read Tim’s Bio Page in full HERE.