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If you’ve ever looked at a plat book, you’ve likely noticed that a lot of land is owned by trusts. But why is that? And what exactly is a trust in the first place? At Wagner Oehler, Ltd., we help farmers, landowners, and families understand how trusts work and why they’re the essential foundation for farm estate planning.
At its core, a trust is a legal arrangement where a person (the grantor) places assets—like farmland—into a trust, which is then managed according to the specific rules of the trust. You can think of a trust like an empty bucket that holds land and other assets. The grantor sets the rules for what happens to what’s inside the bucket, and a trustee is in charge of following those rules.
Most of the time, when you see trusts in a plat book, they’re revocable trusts. That means the original landowner likely created the trust during their lifetime and still has control over it. The owner usually acts as their own trustee, meaning they manage the land just as they did before—only now, it’s in the name of the trust instead of their individual name.
There are several key reasons why farmers and landowners commonly place land into a trust:
1. Avoiding Probate
One of the biggest advantages of a trust is that it allows land to pass to the next generation without going through probate. When someone passes away with only a will (or no estate plan at all), their assets must go through a court-supervised process before being transferred. Probate can be time-consuming, expensive, and public. With a trust, land transfers smoothly without court involvement. Read also: You’ve Got Your Estate Plan – Now What?
2. Estate Tax Benefits
With farmland values rising, estate taxes are a real concern for many families. A trust can include a credit shelter trust, which helps reduce estate taxes at the second spouse’s death by keeping assets out of their taxable estate. This is a key tool for farm families who want to protect as much of their land’s value as possible. See our post on estate tax changes: https://www.wagnerlegalmn.com/new-usda-study-projects-increase-in-share-of-farm-estates-that-owe-federal-estate-tax/.
3. Keeping Affairs Private
Probate proceedings are public, meaning anyone can see what assets were owned and who inherited them. A trust, on the other hand, keeps everything private. This can be especially valuable when farmers want to put purchase options, rights of first refusal, or rental agreements in place for their heirs without public scrutiny.
4. Protecting Against Family Disputes
When an estate goes through probate, all beneficiaries and interested parties are notified, which means they can show up in court and dispute the process. Even if their complaints don’t hold legal merit, they can still cause costly delays and unnecessary headaches. A trust can help prevent this by keeping the process out of court and reducing the risk of conflict. Video: Does a No Contest Clause Really Mean No Contest?
A trust only works if the land is actually placed inside of it. That means the legal title to the property must be transferred into the trust’s name. If a trust is created but never funded, it’s just an empty bucket—it doesn’t provide any of the benefits mentioned above.
When you open a plat book and see land owned by trusts, it’s because trusts are one of the best ways to manage farmland and protect it for future generations. If you’re a landowner, especially a farmer, a trust-based estate plan is almost always the best choice.
At Wagner Oehler, Ltd., we specialize in helping clients structure their estate plans to maximize protection, minimize taxes, and ensure their land stays in the family. We care about the future of farming and farmland. Farming Matters.
If you’d like to learn more about whether a trust is right for your situation, contact us today to schedule a consultation.
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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