The following information is provided by Nationwide, the No.1 writer of farms and ranches in the U.S.*
Finding time for a family to talk about succession planning for the farm may be difficult. The thought of selling the farm or handing over control to family members also may be uncomfortable.
Making the time to develop a solid transition plan for the farming business will help ensure that the family’s wishes are met and emotional stress is minimized.
Know this up front about transitioning the farm
Unlike estate plans, which concentrate on tax liabilities and the various ways to lessen the tax burden, succession plans focus on the future of the farm. They’re an integral part of an estate farm plan.
When deciding to retire, the farm succession plan may include:
- Transferring or selling ownership to a vested family member. To be fair to non-farming heirs, a decision could be made to leave equal settlements of money, stock or other assets.
- Liquidating farm assets, such as auctioning equipment and livestock or selling land.
- Renting or leasing your land and equipment.
- Selling or contracting the property.
Determine the desired end result
Concentrate on the desired final outcomes of the succession. Among the important questions to consider:
- What do my spouse and I envision for the future of the farm?
- Do I want to stay involved with the operation on a smaller scale?
- What kind of income might I need for retirement or health care costs?
If there is a family member who could and may want to take over the operation, make sure there is a comfort level with their knowledge and skills to run it profitably. Also, think about siblings who might each want a piece of the farm. Is there pressure to sell by those who don’t share your love of the land?
Getting it right the first time
Succession plans sometimes fail because certain risks were not considered during the planning stages, including:
- Inadequate cash flow
- Liquidation of some assets to provide for retirement
- Poor farm estate planning
- Unresolved issues between family members or a successor who’s not prepared to lead and manage the farm business
It’s important to enlist the help of qualified professionals who don’t have a stake in the final decisions. They can help make sound, unbiased decisions for the farm estate. Qualified professionals may include:
- A financial or estate planner who specializes in farm estate planning
- A moderator or arbitrator to help with family discussions
- A banker to help with finance resources
- An accountant who has income records and projections for your business
- Your personal attorney, or one who specializes in tax issues