Family farms and ranches often are intended to pass through multiple generations without being sold.  If every member of the family is a model citizen, that may not be a significant problem; however, if even one member of the family has creditor or severe medical problems, that can threaten ownership of the family farm.

If one member of the family who owns a fractional interest in the property has creditor problems, the creditors can seize that fractional interest in the property.  Without planning, like using a limited liability company, that creditor can then force the farm or ranch to be sold.  So, yes, your family farm or ranch can be lost because of your brother’s creditor problems.

A slightly different problem occurs when a family member needs long-term care and government benefits to pay for that car, i.e., Medicaid.  The family farm or ranch may have value, but may not produce significant income, yet the value of that asset will disqualify all of the family members from receiving Medicaid benefits.  One family member may be forced to trigger a sale of the property via a partition action so that they can use the value of their ownership interest to pay for medical expenses and then qualify for Medicaid.

Good planning by use of limited liability companies or trusts can easily prevent these disastrous results.  If your family has property that they intend to be used and preserved for generations, they need to take special care to plan for the probability that one or more members of the family may have creditor or medical problems that could put a farm or ranch at risk.


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.