Trusts and Minnesota Farmland

Similar to transferring a home, cabin, or other piece of real property into a revocable trust, individuals who have inherited or purchased farmland in Minnesota may want to transfer their farmland into a revocable trust.  The reasons vary depending upon the situation, however, the major reason for transferring farmland into a trust is for estate planning purposes.

As discussed in previous posts, revocable trust have numerous benefits.  Such benefits include avoiding the probate process, planning for incapacity, and managing the transfer of assets.  But Minnesotans who own farmland and want to transfer the land into a trust should be aware of the Minnesota Corporate Farm Act (Mn Stat. 500.24).  The reason: A trust that owns farmland in Minnesota is must register with the Minnesota Department of Agriculture by completing the Minnesota Corporate Farm Application.  More importantly, violation of the statute can result in a $500.00 fine and a gross misdemeanor.

A little history.

The purpose of the Minnesota Corporate Farm Act is, “to encourage and protect the family farm as a basic economic unit, to insure it as the most socially desirable mode of agricultural production, and to enhance and promote the stability and well-being of rural society in Minnesota and the nuclear family.”  Although transferring property into a trust may not be contrary to the purpose of the statute, trustees should carefully review the statute to ensure that they are in compliance.

Trusts can be exempt (sort of)

There are exceptions and exemptions available for certain types of entities.  One such exemption is the de minimis exemption.  The statute provides the de minimis exemption

“any corporation, pension or investment fund, limited liability company, or limited partnership that directly or indirectly owns, acquires, or otherwise obtains any interest in 40 acres or less of agricultural land and annually receives less than $150 per acre in gross revenue from rental or agricultural production.”

Notice that the statute does NOT include the trust as an entity eligible for the de minimis exemption.  That being said, the Department of Agriculture has a history of allowing trusts to use this exemption.  The list of Commissioner’s Exemptions indicates that farmland that has been transferred into a trust for estate planning purposes may qualify as exempt.  Even if the Commissioner grants this exemption, the trustees must still file an annual report.  If you own farmland in Minnesota, or if you think that the Corporate Farm Act may apply to you, seek advice from your real property or estate planning attorney.

This article is for informational purposes only and should not be used as legal advice. 

Resources:

• Mn Stat 500.24 – https://www.revisor.mn.gov/statutes/?id=500.24
• Minnesota House of Representatives website – http://www.house.leg.state.mn.us/hrd/pubs/ss/sscorpfarm.htm
• Minnesota Department of Agriculture Corporate Farm Report – http://www.mda.state.mn.us/licensing/licensetypes/corpfarmreport.aspx