Legal Memorandum: Precautions for CRTs using Farm Assets

Issue: Are there special Precautions for Charitable Remainder Trusts that use farm assets?

Area of Law: Agricultural Business, Estate Planning & Probate, Tax Law
Keywords: Charitable Remainder Trusts (CRTs); Farm assets; Special precautions
Jurisdiction: Federal
Cited Cases: None
Cited Statutes: None
Date: 11/01/2008

There are several precautions uniquely applicable to Charitable Remainder Trusts (CRTs) involving farm assets.  Several important pitfalls to avoid are summarized here.

(1)               Remember that Agricultural Land is Not Liquid. 

Trust purposes require cash to be fulfilled.  In the examples above, once the farmer had transferred agricultural assets such as land, livestock and commodities, the trustee sold the assets and retained the cash to disburse in accordance with the grantor’s instructions.  While the sale of crops and livestock may be accomplished quickly, the same cannot necessarily be said for farm equipment and land.  By planning ahead, a farmer can ensure that the trust will be around to fulfill its purpose.  Otherwise, land may be end up liquidated at a low price, greatly diminishing the assets available to fund the trust.  Advance planning is especially important for Charitable Remainder Annuity Trusts (CRATs), where the annual payments are significant. 

(2)        Choose a Qualified Trustee and Administrator.

When setting up the CRT, the selection of a good trustee (and possibly an administrator) is just as important as choosing the right assets.  Agricultural assets and markets can be substantially different from non-agricultural businesses like retail stores, health care clinics and professional service providers.  A trusted relative from another state may be acceptable as a guardian for children or a trustee for a life insurance trust; however, a trustee that must handle sales of agricultural commodities, equipment and land must have special acumen to make the most […]

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