February 7th, 2025

Charitable Remainder Trusts: A Smart Tax Strategy for Retiring Farmers

A Charitable Remainder Trust (CRT) is a legal structure that allows you to sell assets tax-free, generate retirement income, and support a charity of your choice.

Here’s how it works:

  1. You establish a CRT and contribute your equipment, grain, or land into the trust.
  2. The trust sells those assets—but because it’s a tax-exempt entity, it doesn’t pay capital gains tax.
  3. The proceeds are invested, and the trust pays you (or you and your spouse) an income stream for life or a set number of years. You pay tax on the income as you receive it rather than all at once like in an outright sale.
  4. After the trust term ends, the remaining funds go to a charity of your choosing—your church, FFA, 4-H, local foundation, or any qualifying non-profit.

This means:

✅ No massive tax hit upfront
✅ More money stays invested and working for you
✅ A steady, predictable retirement income
✅ A charitable legacy supporting causes you care about

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How Farmers Use CRTs for Retirement

We’ve helped many farmers structure their retirement using CRTs, often with these assets:

✔️ Farm Equipment & Machinery – Instead of selling everything at auction and facing a big tax bill, they contribute it to a CRT, which then conducts the sale tax-free.

✔️ Stored Grain – That last crop often has no deductions left to offset it. Putting it in a CRT means selling it tax-free and turning it into income.

✔️ Land Sales – Some farmers want to sell part of their land but keep the rest. A CRT can be an efficient way to sell without getting hit by capital gains tax.

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Real-World Example: How a Farmer Saved Thousands

One of our clients, a retiring farmer, had $1 million in farm equipment to sell. If he had sold it outright, he would have owed hundreds of thousands in taxes.

Instead, he set up a Charitable Remainder Trust, contributed the equipment to the trust, and let the trust handle the auction.

? The result? No capital gains tax. The entire $1 million stayed in the trust, earning income for him and his spouse for life. Of course, they will pay income tax on the payments they received from the trust but in a lower tax bracket, and while allowing the undistributed portion to continue to be invested. When they pass, the remainder will go to their church and FFA—a legacy that lasts beyond their lifetime.

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Is a Charitable Remainder Trust Right for You?

If you’re a retiring farmer with assets to sell, a CRT might be a powerful option to keep more of your money working for you instead of going to taxes.

Here are some key considerations:

✅ Do you want to sell equipment, grain, or land without a big tax bill?
✅ Would you like to create a reliable income stream for retirement?
✅ Do you want to support a charity of your choice?
✅ Are you looking for ways to maximize your financial future?

If the answer is yes, it’s worth exploring whether a Charitable Remainder Trust could fit into your farm succession or retirement plan.

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Let’s Talk About Your Farm Retirement Plan

Every farmer’s situation is unique. If you’re thinking about retirement and want to explore options that reduce your tax bill and maximize your income, we’re here to help.

?Contact us today at Wagner Oehler for a consultation. Let's make sure your farm retirement plan works for you, not against you.

To learn more about farm succession and estate planning, keep an eye on our Events page located at: https://www.wagnerlegalmn.com/events/.

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Categories: Estate Planning, Farm