As previously written in Trusts and Minnesota Farmland, the Corporate Farm Act imposes restrictions on the ownership of farmland here in Minnesota. Among other things, it requires that certain entities such as Partnerships, LLCs, and Trusts qualify under Minnesota Statute 500.24 in order to hold title to farmland.
The result is that if an individual has inherited farmland and wants to avoid the probate process, or wishes to limit his or her liability when it comes to farming activity, he or she must create an entity that qualifies under the Statute. The type of entities available include: Family Farm Corporations, Family Farm Trusts, Family Farm LLCs, Authorized Farm Corporations, Authorized Farm LLCs, Authorized Livestock Farm Corporations. The type of entity chosen depends upon a few factors, for example:
- The goals of the individual that inherits the farmland;
- Whether a family member (within a “third degree of kinship” to the person creating the entity) actively farms or lives on the land;
- The number of individuals who will own the entity or benefit from the entity’s existence;
- How many acres make up the land; and
- The date that the transfer or inheritance takes place.
MN Statute 500.24 Subd. 3.(b) allows the commissioner to issue an exemption for certain entities that would (1) not contradict the purpose of the statute and (2) not have a significant impact upon the agriculture industry and the economy.
As mentioned in my previous article, the existing precedent is that the commissioner issues exemptions for transfers that are made for estate planning purposes. It is possible (although unlikely) that the commissioner may someday find that these transfers “for estate planning purposes” contradict the purpose of the statute. In that case, the entity may cease to qualify. Until then, individuals who own or inherit Minnesota farmland may rely on the precedent set by the commissioner in allowing trusts and other entities to be created for estate planning purposes.
This article is not a substitution for legal advice. An individual who inherits farmland should contact an attorney to discuss his or her options.
