Estate Planning for Farmers
Every farm owner knows: Your farm is more than just your business; it is your way of life. Farmers have an attachment to their land that other business owners may not. The farm may have been in your family for generations, and each of those generations may have lived on the farm itself. The land is the farm, and if you cannot pass on the land for the next generation you will not be passing on your farm. Your farm is a part of your family and it is incredibly important to you that it can be passed down.
Similar to other business succession plans, determining your goal is one of the most important parts of the process. Do you want to retire or keep working the farm as long as possible? Would you like to continue to own the farm but have someone else do the work? Are you planning on passing on the farm to the next generation or selling it during your lifetime? Sometimes the goal itself takes the most thought and reflection, but you cannot start making a plan until you understand your goal
Saving the Farm
If your goal is to pass the farm down to the next generation and keep it in your family, you need to consider how that will occur. Your plan must address who has the continued obligation to pay the debt on the farm. If there is not a plan in place to continue to pay the debt on the property after you pass on your interest, there will not be a farm to pass on. When choosing which member or members of your family will take over the farm, you need to consider their access to credit to pay for the expenses of operating the farm. Debt is one of the largest expenses to farm families and whichever member of your family continues the operation after you must consider this expense. One of the largest concerns for farm families is protecting the farm from Long-Term Care expenses. It will not matter what your goal is if your Long-Term Care expenses eventually eat up the equity in your farm. Therefore, you must plan for a way to pay for long-term care expenses or to protect your assets from those expenses.
After you ensure your farm is protected against debt and Long-Term Care expenses, you need to determine which member of your family, if any, wants to run the farm. If no member of the family wants, or is able, to take over the farm then your plan to pass it to them will never work. Also, it is important to remember that sometimes what is fair and what is equal are very different. Perhaps one child has put in substantial work or money into the farm, whereas the others showed little interest during your life. It is possible that the child inheriting the farm will also receive a larger portion of your estate than what would be considered “equal” if they all inherited the farm together. That may sound bad, but it is important to remember that if your goal is to continue the operation of the farm within your family, it may not be feasible for everyone in the family to be involved in ownership.
Once you have determined who will be involved in the farm after you, you can begin to look at how you can accomplish your goal. You will need to do some research and speak with professionals to find which option works best for you and your family. After you have selected your plan, you will need to make sure that everyone involved is on the same page by ensuring they are up to date on your plan and the timeline of its implementation. Also, remember it is important to have your plan reviewed every few years. Your life, and your children’s lives, change and those changes may impact how your plan will work for you. It is important to make the necessary changes to your plan to accommodate the changes in circumstances.
Know Your Options for Protecting the Family Farm
