Given that there are more than 2 million farms in the United States, most advisors have at least one client who owns farm property. Although the number of farms has been dropping slowly but steadily since 2000, still, millions of dollars of wealth are tied up in farms as agricultural land continues to be valuable.
Farmland, like many other hard-to-value assets, tends to carry with it a lot of emotional attachment. Farmland also can be hard to deal with in an estate plan because of the challenges of multiple owners and the complexity of the estate tax as it’s applied to farm-related assets. For these reasons, it is worth exploring philanthropic options with your clients who own farmland.
Multiple ways to structure a gift
A Fund at the Omaha Community Foundation can receive a tax-deductible gift of farmland in a variety of ways. An outright gift is always an option; lifetime gifts of farmland held for more than one year are deductible for income tax purposes at 100% of the fair market value of the property on the date of the gift, which also avoids capital gains tax and reduces the value of the client’s taxable estate. Another option to give farmland includes a transfer to a charitable remainder trust (“CRT”) which produces lifetime income for your client, which trust can name a Fund at the Omaha Community Foundation as the charitable beneficiary. Naming a Donor Advised Fund as beneficiary of a CRT has a variety of benefits, including taking the pressure off of identifying the ultimate charitable beneficiary at the start of the CRT, and the donor’s family can continue to be involved in the legacy of the donor.
Keeping the family together
A gift of farmland to a Fund at the Omaha Community Foundation doesn’t just provide tax benefits. The gift also helps your client overcome the emotional challenges associated with letting go of an asset that, in many cases, has been in the family for generations.
By donating farmland, your client can work with the Omaha Community Foundation to extend the important family-related dynamics that were previously linked to the land. For example, multiple generations of family members can serve as advisors to the Fund and collectively recommend grants to charities that carry on the values held by the family, such as promoting sustainable farming or supporting programs that educate entrepreneurs about how to build a successful farming operation.
We are happy to help you and your client structure a gift of farmland to a Fund at the Omaha Community Foundation. Please reach out to Katie French McGill, Gift Acceptance Manager, to discuss gifts of farmland and other non-cash giving options.