By Attorney Brooke Didier Starks, Legacy Legal

At Farm Credit Illinois’ recent estate planning seminar, we discussed transition tools and how they stack together to support a smooth generational transition for farm families.

Prior to building your own estate plan, I strongly encourage a mindset shift that recognizes a transition or succession plan isn’t a single document but a system. It is an intentional sequence of decisions that move control, economics, and protection in a specific order.

When transition planning, it is important to be aware of four risks that can quietly derail transitions:

1. Estate taxes and liquidity pressure
2. Capital gains “basis surprises” or basis handcuffs
3. Family conflict (fairness vs. farm efficiency)
4. Divorce and life events that can disrupt ownership or force sales

As we prepare to best protect ourselves against these risks, we take a look at the transition planning toolbox.

My Five-Tool Toolbox

Quick-hitter planning tools I refer to most often and how they can support your long-term goals:

• Revocable trusts: These provide authority and a roadmap, plus Illinois marital planning that can preserve the first spouse’s Illinois estate tax exclusion ($4,000,000 per spouse; no portability)
• LLCs: These keep land consolidated while separating control from economic interests, which is often the key to being fair without dividing acres
• 2032A special-use valuation: This tool can reduce the taxable value of qualifying farm real estate at death. It protects value while your trust/LLC strategy protects outcomes – who controls, who benefits, and how heirs avoid a forced sale
• Lifetime gifting: This moves value early, forces the conversation now, and should be coordinated with basis planning
• Irrevocable trusts: Think of these as a “risk vault” for estate reduction and creditor/divorce protection. They are powerful, but irreversible by design
• Bonus - GST trust planning: This allows families to “skip the taxation, not the benefits” and provides creditor protections including addressing the common concern, “What happens if they get divorced?”

Remember one tool can transfer an asset but only a coordinated system can transfer the farm. While these tips aren’t expected to help you create your entire estate plan, they certainly help get the wheels turning and begin the conversation.

To start building your own transition plan, here are five actions you can take this quarter:

1. Inventory how every asset is titled
2. Define the operator-successor and decision authority
3. Get clear on how “fair” is defined (equal vs. equitable) and communicate it
4. Build a transition timeline
5. Identify which tools best fit your family’s goals

Remember, getting started is often the most daunting part, but the farms and families that face the most unfortunate circumstances are those that wait until it’s too late.