How to Pass Land Using a Disclaimer Trust

A husband dies, with an estate plan presenting two options to his surviving spouse: she can either inherit family farmland outright or disclaim it to a separate trust for her benefit. If she chooses the trust, she will receive income for life, and upon her death, the disclaimer trust will be divided equally among her three children. How to manage this situation is explored in an article from Successful Farming, “Should Land Go Into a Disclaimer Trust or Pass to the Spouse?”

Her concern is valid, as only one of the children is farming the land, and he’s concerned about how his siblings will accept the decision. She was told that the trust would be a good option due to its tax advantages. What are her options? There are five key elements to consider:

Estate taxes. In 2025, the federal estate tax exemption is $13.99 million per person. If she disclaims her husband’s portion of the land to the trust, the value won’t count towards her own personal estate. If she keeps the land, she can take advantage of portability for her husband’s exemption under IRS Form 706. Her own estate tax limit will increase to almost $28 million. The ported tax credit will remain flat as the estate’s value grows.

Asset protection. If the land goes into the disclaimer trust, it’s in there for good, and income and principal distribution rules can’t be changed. This is beneficial for protecting assets from creditors, as well as any complications arising from a second marriage or incapacity. However, is it beneficial for the family? If they need protection, the disclaimer trust is the place for the land. However, if they need it to be accessible, it should remain outside of the trust.

Asset control. The trustee is the fiduciary responsible for assets in the disclaimer trust. They can set a rent price and make decisions on capital improvements. Questions need to be clarified regarding requirements in the trust documents. Do these rules work for the family’s best interest, or is it better to have rules as defined in the surviving spouse’s will?

Distribution. Assuming the disclaimer trust ultimately divides the land between the three siblings, it lacks a means of keeping the land together. How will the son continue farming, knowing the land will be divided? Retrofitting a farm succession plan is like trying to move crops from one field to another. They won’t look pretty and may or may not grow.

This scenario is not unlike the situation many small business owners find themselves in when the spouse who has created a business dies and no succession planning has been done. An appointment with an estate planning attorney is crucial for creating a comprehensive plan that encompasses the farm, business, and family for both the near and distant future.

At The Werner Law Firm, we know that estate planning for farmland and other family assets requires careful consideration. Our experienced estate planning attorneys can help you navigate the complexities of disclaimer trusts, estate taxes, and succession planning to ensure your loved ones—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.

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