Should You Use a Disclaimer Trust to Pass Down Farmland?

When a spouse passes away, the surviving spouse often faces complicated decisions about the future of family assets—especially farmland. In a case described by Successful Farming in the article, “Should Land Go Into a Disclaimer Trust or Pass to the Spouse?”, a widow is presented with two options under her late husband’s estate plan:

1. Inherit the farmland outright
2. Disclaim the inheritance, placing the land into a disclaimer trust for her benefit

If she chooses the disclaimer trust, she would receive income generated from the farmland for the rest of her life. After her passing, the land would then pass equally to their three children. However, only one child is actively farming the land, and he’s concerned about future complications with his siblings.

To decide the best course of action, several key factors must be considered:

1. Estate Tax Implications

For 2025, the federal estate tax exemption stands at $13.99 million per person. By disclaiming the farmland and placing it into a disclaimer trust, the land’s value would not count against the widow’s own estate.

Alternatively, she could keep the land and use portability—transferring her husband’s unused estate tax exemption to her own estate by filing IRS Form 706. This would increase her exemption to nearly $28 million.

The main difference lies in future growth:

• Assets in her name grow within her taxable estate.
• Assets in the trust are sheltered from estate taxes but locked into the trust’s terms permanently.

2. Asset Protection

Assets placed in the disclaimer trust gain protection from creditors, potential claims from a future marriage, or issues arising from incapacity.

However, this protection comes with trade-offs:

• The land would be subject to strict trust rules.
• Income and principal distributions would be limited to the terms of the trust.
• If the family needs flexibility in the future, this may not be the best route.

3. Control Over the Land

The trustee of the disclaimer trust would control decisions about:

• Setting rental rates
• Managing repairs and improvements
• Distributing income

This raises a question:
Would it be better for the widow (or another family member) to control these decisions through her personal estate plan rather than locking them into a rigid trust structure?

4. Succession and Family Dynamics

If the disclaimer trust ultimately divides the farmland equally among the three children, this could cause long-term complications:

• The farming child may face obstacles maintaining operations if the siblings choose to sell their shares.
• The lack of a succession strategy can cause disputes or force a sale of the land.

Farm succession is notoriously difficult to implement retroactively—just like trying to transplant crops from one field to another, the results may not thrive.

Estate Planning for Farmland Requires a Holistic Approach

This scenario is not unlike situations faced by family business owners with no clear succession plan. Consulting an experienced estate planning attorney is critical to:

• Weigh the pros and cons of the disclaimer trust
• Review tax and creditor protection issues
• Develop a farm succession plan that aligns with family goals

Protect Your Family’s Land and Legacy

At The Werner Law Firm, we understand that family land is more than an asset—it’s a legacy. Our estate planning attorneys can help you navigate complex issues like disclaimer trusts, tax implications, and farm succession, ensuring your family and your land are protected for generations to come.

If you have any questions, schedule a free appointment with us through our online appointment page.

You can also read reviews from some of the hundreds of clients we have helped over the years.

Reference: Successful Farming (June 9, 2025) “Should Land Go Into a Disclaimer Trust or Pass to the Spouse?”