Higher Interest Rates Make CRTs More Attractive For Retiring Farmers

The continued stickiness of higher interest rates continue to make charitable remainder trusts a good option for retiring farmers to save on income taxes.

Photo by sawyer on Unsplash

Retiring farmers who have kicked the tax “can” down the road for decades are usually facing a very large tax bill in the final year of retirement. They typically have incurred all of their expenses in the year of harvest, but much of the crop has been pushed to the following year(s).

Some farmers plan on spacing out their crop sales over a couple of years to reduce the tax burden, however, this leads to issues with price volatility, shrinkage of the crop, the loss of time value of money and other issues.

Another option is to sell the crop on a deferred payment contract, however, that has some risks too such as the financial condition of the purchaser.

One option that has been very successful for many farmers is to transfer their grain into a charitable remainder trust (CRT). There is no tax deduction for the transfer, but the CRT can sell the grain for cash and the farmer only pays income taxes as an annuity payment is paid to them each year.