Estate planning with family farms presents unique and challenging issues. Some of these include:
- Asset Division: How to divide assets between children but keep the farm going for the child(ren) who operate it.
- Farm Preservation: How to keep the family farm intact.
- Management Succession: How to transfer management of the farm to a child upon retirement.
- Retirement Income: How to provide income for your retirement years.
- Longterm Care:How to protect your farm from longterm care costs.
- Estate Taxes: How to pay estate taxes if most of the assets are in the farm.
- Income Taxes: How to sell depreciated machinery without getting a huge income tax bill.
Careful Estate Planning and Farm Transition/Succession Planning are needed to address increasingly complex issues.
Estate PlanningEstate Planning is basically deciding who gets your stuff, when they will get it and how the transfer will be accomplished.
Who gets what is often one of the most difficult decisions to make when the bulk of your estate is farmland. Giving your children undivided interests in land produces difficulties for your children down the road. However, it is also hard to equitably divide your land, especially if you continue to buy and sell land after you create an estate plan.
In addition to land, plans for the following assets need to be made: livestock, crops, machinery, feed, investments, life insurance, savings, personal possessions, etc. The repayment of debts also needs to be addressed.
Farm Transition/Succession PlanningFarm transition/succession planning refers to creating a plan to transfer ownership and management of the farm upon the retirement, disability or death of the farmer. It involves more than simply dividing assets because the ability to continue the farm depends on the use of most, if not all the assets. This is a multi-faceted task with the primary objective of assuring that the family farm has the resources to continue operations for generations to come.
Transition planning also affects the current operation of the farm. By planning, you look at the best business structure to be currently using, examine and improve your farm management, reduce your liability, and make decisions on how you will transfer management to the next generation.
What to do
Educate yourself. Read about the issues and options available. Each person’s situation is unique. Identify the issues confronting you and your business. The best plans come from being fully informed.
Communicate. Talk with your spouse and children. They may have ideas that you do not see. Also, you will learn their expectations and feelings on these matters. Good family communication now will help avoid family problems later. Your children won’t be left wondering, “What were Mom and Dad thinking?!”
Gather Information. Make a list of your assets. Put together a Net Worth Statement. Gather all your current legal documents. This information is necessary to creating an estate plan.
Get Professional Help. Consult with your CPA, financial advisor and/or an attorney. Find a competent attorney who understands the issues facing farmers and ranchers, who listens to your needs and who will help you craft a plan for transitioning the farm to the next generation.
Don’t Procrastinate. Protect your family, farm and yourself by taking action today. Don’t put it off any more.