Depending on the state that your farm resides, there may be legislation in place that could help your homestead property financially. For instance, in the state of Minnesota, a special law provides an estate tax exemption for agricultural homestead property. Without the assistance of a financial advisor, you may completely miss this way for your farmland to save a little money each year. One way to ensure that you are staying on top of the ever changing laws and regulations around a farm legacy plan is to regularly review this with your financial team. If you are looking for a financial advisor, our team at Dunncreek Advisors is eager to assist!
The Minnesota Homestead Exemption
Back in 2011, the state of Minnesota initiated an estate tax rule for family homesteads, which allowed for a $4 million Minnesota estate tax exclusion per individual. This new exemption was in addition to the standard $1 million estate tax exclusion available to all individuals. Determining whether or not your family farm qualifies for this additional exemption is something that should be figured out with your financial estate planner. Some unique factors around whether or not your property qualifies as a homestead includes:
- If the owner of the land lives on the property but rents out the actual land to an unrelated individual, the farm is considered a homestead.
- If the owner of the land does not live on the property and isn’t within 4 contiguous townships of the property, then the farm is not considered a homestead.
- If the owner of the land is a member of the entity that oversees the land and the owner lives on the land or lives in town within 4 contiguous townships of the property, and rents the land to a family member that is not a member of the entity, the farm is not considered a homestead.
Importance of an Estate Planning Professional
As you can see, understanding the ins and outs of whether or not your family farm qualifies as a homestead can be difficult. This is not the only difficult question that you’ll need answered financially for your family farm. Building a relationship with an estate planning financial professional is a great step to protecting your family farm. Regularly reviewing your legacy plan going forward is another great habit for you to develop with your financial advisor. Staying up to date on the ever changing rules and regulations can help you financially long term.
If this article has you starting to think about your homestead situation, get in touch with my office at rdunn@dunncreekadvisors.com. I always like meeting with people who have started thinking about this. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.