For many farm and ranch families, bringing children or grandchildren into the operation is the ultimate goal. Successfully bringing additional family members into the operation may require some creativity as all parties need to maintain a viable standard of living. This article is part of a series that will highlight ideas and tactics for bringing another family member into the operation. If this is the first article you are seeing in this series, I would encourage you to go back to the previous articles for background and additional guidance. A previous article discussed how life insurance should be structured, and the different types of life insurance.

Life insurance can be a key tool for farm and ranch businesses to provide tax-free death benefits at the death of the insured if the policy is structured correctly. This article discusses how agricultural businesses can use life insurance policies to protect against debt. Future articles will discuss how life insurance can be used for inheritance equalization and funding buy-sell agreements.

Leaving one’s family with a large amount of debt at their death can be a concern for farmers and ranchers. When someone dies, the debt does not disappear, it must be paid out of the estate. One way to mitigate this risk is to purchase term life insurance policies at the start of accruing debt.

Let’s look at an example. Continue reading

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