As promised, here is the beginning of the case study as it relates to role that survivorship life insurance serves in helping to settle the final estate on the Frank family farm. Hard facts are as follows:

Harry and Mary Frank are grain farmers who operate on 2,500 acres, 1,500 of them owned. Thankfully, debt is not an issue. Their son Bill farms 500 acres on his own, as well as working closely with his parents. By the time the farm passes, Bill will own the entire line of equipment. But he will obviously need the family land to remain viable once his folks retire and pass on. Their daughter Jill and her husband have no interest in the farm as they live far away and have successful careers of their own.

Harry and Mary are both 60 years old and have had to see a doctor for a few minor things, could shed a few pounds, as most of us could, yet remain in relatively good health. They plan on actively farming, with their son’s help for the next few years, and hopefully, someday retiring. They desperately desire to have a solid plan in place to ensure a positive and lasting legacy for themselves … and the farm. They would like to pass all the farm assets to Bill, as they are of the opinion that farm assets should remain with those actually working the land. They want to explore a few funding options to provide Jill with an equitable — not equal — inheritance. After all, value in land is on paper only. In reality, it only provides an opportunity to work, take risks and make the best of it. Cash inheritance equals opportunities of any nature desired for Jill.

Let’s assume the land is realistically valued at $4,000 an acre. So, we have $6,000,000 of land to consider. Harry and Mary have determined that Bill has earned the right to inherit two thirds or $4,000,000 worth of land. We need to figure out how to ensure Jill gets $2,000,000 of inheritance to balance it all out. Harry and Mary are not cash heavy, as any profits realized were always quickly plowed back into the farm. There are a few investments that could possibly be used, but who knows what dollar amount will remain when they eventually pass. Common sense dictates that it is best to just distribute these assets in equal amounts.

So, where do we come up with $2,000,000 of cash? A formidable task. One option would be to take cash out of working capital and quite frankly, this is something that few farm families can easily afford. Another, if even possible, option would be to borrow the money. The high cost of interest over time is an obvious and an ever-looming problem. As are the principal payments themselves. Opportunity costs must be considered as well. Leveraging a young farm family to buy once paid for land from family leaves little room for expansion or major equipment updates.

Jill could just inherit the land. That leaves the door wide open for a plethora of problems. Starting immediately with Bill now a bit beholden to his sister and brother-in-law holding the cards on 500 acres of land he needs. Not a position most producers care to be in.

Or, the desired results can easily be achieved with the prudent use of survivorship life insurance. Recall from previous columns that this is a policy designed specifically for estate planning purpose where large amounts of tax-free money are needed. And, at a quite reasonable cost. Amounting to a guaranteed investment with an exceptional rate of return on the premium dollars expended.

So, Bill could pay dollar for dollar with on hand cash — assuming it is there. Financing could be used, and he will pay several dollars on each dollar. Or, survivorship life insurance could be utilized, and the cost is now mere pennies on the dollar. By doing nothing, he can just suck it up and assume the role of farming for his sister and her husband. If I have your interest, check out next month’s column for the exact costs involved in this scenario.

Dennis Foster has been helping families with financial and estate planning needs for 25 years. He welcomes comments and questions and can be reached at 605-887-7069 or

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