AFM Farm Succession & Estate Planning Flashcards
6 cards from real AFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AFM Farm Succession & Estate Planning flashcards as text
A farm manager helping a client transition the operation should recommend life insurance primarily to:
Answer: Provide liquidity to pay estate taxes, equalize inheritances, or fund a buy-sell agreement without forcing land sales
Life insurance creates immediate liquidity at death to pay estate taxes, equalize distributions among farming and non-farming heirs, or fund buyouts without liquidating farmland.
IRC Section 6166 provides an important estate planning benefit for farm heirs by allowing:
Answer: Installment payment of federal estate taxes attributable to a closely held farm business over up to 14 years
IRC §6166 lets qualifying farm estates defer and pay estate taxes in installments over up to 14 years at favorable interest rates, preventing forced liquidation.
A stepped-up basis is a critical concept in farm succession because it means that heirs who inherit farmland:
Answer: Receive a new cost basis equal to the fair market value at the decedent's death, eliminating built-in capital gains
A stepped-up basis resets the heir's cost basis to date-of-death fair market value, so only appreciation after inheritance is subject to capital gains tax if the land is later sold.
When a farm is operated as a sole proprietorship and the owner dies without succession planning, the most likely outcome is:
Answer: The farm assets pass through probate, creating uncertainty, delays, and potential forced sales to settle the estate
Without a plan, the farm passes through probate, which can be slow, costly, and public, and may force asset sales if estate liabilities exceed cash on hand.
An AFM-certified manager's role in a farm succession engagement typically includes:
Answer: Assessing the farm's financial position, identifying succession goals, and coordinating with legal, tax, and insurance advisors
The AFM manager serves as the coordinator and financial analyst in a succession team, working alongside attorneys, CPAs, and insurance professionals rather than replacing them.
A Charitable Remainder Trust (CRT) can benefit a retiring farm owner primarily by:
Answer: Converting highly appreciated farmland into a diversified income stream while avoiding immediate capital gains tax and generating a charitable deduction
A CRT allows the owner to donate appreciated land, avoid capital gains on the sale inside the trust, receive an income stream for life, and claim a charitable deduction.