how to pass on the family farm
How to pass the family farm to the next generation?
Most importantly, your goals should factor in your needs in retirement and as you age. In the process of passing the family farm or ranch to the next generation, you may start letting your heirs manage the land, purchase farm equipment and take on more responsibilities.
What is the best way to transfer a family farm?
The best way to transfer a family farm or ranch varies from family to family. That’s why the first step of an effective farm succession plan is to define your goals by prioritizing your needs first — after all, these are your assets. Then, you can incorporate the needs of future generations who will also benefit from your succession plan.
Can a family member buy a farm from a deceased person?
Family members can purchase the farm from you once you have reached retirement age, and the proceeds can then be incorporated into your estate plan and divided among all of your heirs accordingly. However, this can result in capital gains and recapture taxes, which reduce the value of what you can pass on once you die.
How do you pass a farm to an heir?
Don’t be afraid to gift the farm corporation while you are still active. It’s one of the only ways to pass down the farm today. Talk to your attorney and tax adviser. Off-farm heirs can be gifted parcels of land that can be rented back to the on-farm child.
A couple puts an equitable plan in place for their children, only one of whom will continue to farm
A couple we’ll call Harry, 53, and Martha, 50, farm 5,500 acres in Manitoba’s Interlake region. They have three children ages 19, 20 and 24. Only the eldest, who we’ll call Bruce, is interested in taking over the farm one day. The other two see their destinies in what could be called town jobs.
About the author
Andrew Allentuck’s book, “Cherished Fortune: Build Your Portfolio Like Your Own Business,” written with co-author Benoit Poliquin, was recently published by Dundurn Press.
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What was Kendell Litchfield’s transition plan?
Kendell Litchfield’s transition plan was straightforward. “My plan A, B, and C were all the same when I got out of college: I was coming back to the farm.” He started farming full-time with his father and uncle in 1985. “Dad and Uncle Maurice had bought some ground at the wrong time, and it was tough. Dad said he didn’t know if we could make it work. I told him if it didn’t work I would do something else. Thankfully, it worked.”
Where did Cathy meet Mike Downey?
They want to be fair to her while assuring the continuation of the farm. Cathy met Mike Downey and Steve Bohr of Farm Financial Strategies in Lisbon, Iowa, at an ag banking meeting and set up a series of consultations.
What is the biggest mistake farmers have made?
The biggest mistake he’s seen is when farmers think, “My kids will figure it out.” That is based on a premise that they love each other and they’ll come up with the best plan once you are gone. “That is a false assumption,” says Dvorak.
What are farmers uncertain about?
Farmers are uncertain this fall about elections and fear increased taxes , says attorney Dave Dvorak, Omaha, Nebraska. “It’s a perfect storm that is getting people to come to grips with their mortality.” We are in an unprecedented period from a wealth transfer perspective under the current law, he explains. Families can transfer $23 million of taxable value to subsequent generations tax-free. At the end of 2025, that exemption level gets cut in half. “There’s no time like the present, because the exemptions are at an all-time high,” says Dvorak. “That’s a huge motivating force. People need to move. You don’t want to be sitting on the sidelines right now.”
Why was Austin’s first year the worst?
When Austin came back, Steve told him the first year was his best worst year. It was the best year because he got to farm with his son. It was the worst year because it was so wet the planting didn’t get finished until June.
What is the test of Ryan’s desire to farm?
Harvest, which consumes so much time and energy, will be a test of Ryan’s desire to farm, says Kendell. “After a couple of harvests, if farming is his passion, good, and if not, he is young enough to pivot into something else. I’m not going anywhere.
Why is Farm Management working on a web-based platform?
They are working on a web-based farm management platform so they can have real-time insight to profitability at the field level. “It would be difficult to have Ryan take over spreadsheets I created over the years, so I thought we might jump into this new platform. It’s going well,” says Kendell.
How to replace debt with a lower interest rate?
Consider refinancing your current debt. Depending on the current economy, you might be able to replace your existing debt with one loan that has a lower interest rate. Talk to your financial advisor about refinancing opportunities and research carefully.
How to avoid high interest debt?
Avoid high-interest debt. Just like you would with your personal finances, avoiding unnecessary high-interest debt will help you avoid major financial headache for you and your family members down the line. Achieving minimal debt can be as easy as curbing purchases that aren’t totally necessary, discussing potential purchases with heirs and consulting a financial advisor.
How to secure your legacy?
In order to secure your legacy, it’s important to build a farm succession plan. Involving the right people and having the right conversations will give you peace of mind, knowing that the next generation is taken care of. Use these tips while building out your plan: Resource.
How to keep a farm growing for future generations?
The best way to keep your farm growing for future generations is to make sure your family has a common understanding. Use these tips to help get your family involved in the family business and reduce any confusion down the line.
How to plan for the future of a farm?
Plan and discuss a future that doesn’t involve unwilling members of the family and be honest to avoid any sort of miscommunications or misunderstandings . Don’t worry about over-communicating. Encourage communication — it’s the only way your family can understand the plan for the farm’s future. When everyone feels free and comfortable voicing …
How to deal with a farm that is in someone else’s hands?
Get comfortable giving up control. Coming to peace with the fact that the farm will be in someone else’s hands at some point might be tough to handle. You can alleviate that stress by getting willing family members involved as early as possible and communicating.
How to maximize your farm?
And while not every advancement is worth implementing, staying on top of the best practices related to your business can help maximize your farm’s potential. If you don’t already, subscribe to trade publications that focus on your specific type of farming.
What happens to farm capital gains after you die?
However, this can result in capital gains and recapture taxes, which reduce the value of what you can pass on once you die. It also requires that the family members purchasing the farm either have access to potentially large amounts of money or acquire debt to complete the purchase.
Do you have to pay more to buy a farm when you die?
However, they may have to pay more to purchase the farm at your death instead of your retirement if the farm’s value increases during that period of time. To get around this, you could agree to give the purchasing family members a set price or predetermined discount ahead of time, factoring in your overall estate plan.
Can you purchase a farm after you die?
Alternatively, the family members who will continue operating the farm can purchase the farm after your death. This way, they can take advantage of estate planning rules to eliminate the capital gains tax, as the farm receives a step up in basis after your death.
Can family members buy a farm?
Fortunately, there are several ways to reach a compromise. Family members can purchase the farm from you once you have reached retirement age, and the proceeds can then be incorporated into your estate plan and divided among all of your heirs accordingly.
Can you split a family farm?
Splitting up your family farm is not a simple process. You must determine how your family can sustain farm operations in later generations while dividing the estate equitably among your children. This gets particularly tricky when some of your children are working the farm and others are not.
How to transition a farm?
If you go this route, you should schedule the meeting well in advance to ensure that everyone can join. When you meet, start by sharing your goals for the future of the farm or ranch to help your heirs understand how you made your decisions during the farm succession planning process.
How many acres does a 200 acre farm have?
A 200-acre farm can create a lot of income, but a 200-acre farm split five ways leaves each heir with 40 acres of farmland, which limits total production by reducing economies of scale. Not only that, but the non-farming heirs are likely to sell the land, which means that it will leave your family’s ownership.
What to consider when planning a farm succession plan?
Likewise, there may be certain charities you’d like to donate assets to, or you might have stipulations on the how the land you’re passing on should be used. Ultimately, you must determine what you want for your legacy. This will be your north star when you put your farm succession plan into motion.
How much land can you give to your heirs?
Gifting your land to your heirs can help with gift taxes, especially if you’re dividing it among several people. You can give up to $15,000 of property each year — to as many people as you’d like — without paying gift tax.
How long does it take to buy land from another heir?
If you have three heirs, for example, you could structure your plan so that each heir receives one-third of the land, with one heir bound to purchase the land from the other two over the course of 20 to 30 years through a contract for deed.
What does it mean to gift a property?
However, gifting a property means that you are also giving up ownership rights to that property. This means you may end up paying rent to your heirs.
How to transfer ownership of livestock?
If you have breeding livestock, you may decide to sell a portion of your breeding herd to your successor. Payments can be made in installments, or you may choose a roll-over approach. In the latter case, you continue to own the breeding herd, but you and your successor share joint ownership of the offspring.