Succession Planning for Farmers

Farmers should not rely on their estate plans alone to pass on the family farm or to ensure a family member can carry on the farming business. Instead, farmers should create a succession plan, a process by which family members create the foundation for the eventual transfer of the family business. According to one attorney who specializes in farm transfers, farmers should begin transferring assets to younger generations as soon as both generations are comfortable. Farmers should also determine how much money they will need to live on following retirement.

Though a succession plan is important to the family business, farmers should also ensure they have a proper estate plan in place. Aside from the typical goals achieved through an estate plan, a farmer’s estate plan should also (1) transfer ownership and management of the business, farm land, and other assets, (2) avoid or reduce transfer taxes, (3) ensure financial security for all generations, (4) develop the next generation’s management capacity.  Farming couples should also address (1) how to convert assets to cash—a hard task for farm assets, (2) how to divide the farm and its assets among family members, (3) whether the farm is large enough to divide among multiple family members, and (4) how non-farm assets will be divided among younger generations.

Farmers may also want to consider purchasing long-term care insurance to protect family property from being used for health care costs. Additionally, farmers should determine whether a limited partnership or corporation would be an appropriate approach for the transfer of ownership of the family farm. Finally, farmers should consider gradually transferring management responsibilities and assets now as it can help provide a smooth transition of the entire business from this generation to the next later on.

See Jane Fyksen, Estate Planning Lays Framework for Smooth Transition, Agre-View, Mar. 29, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.