Farm Succession Planning
Successful family farms are often the pride of their owners, and they want to pass on the farm to other generations to form a legacy. Unfortunately, only 30% of family owned farms transfer effectively to the next generation. A clear and concise succession plan can alleviate many of these pitfalls, but the majority of farm owners do not go beyond creating a will.
Here are a few suggestions on how to make an effective succession plan for a farm.
- Organize a team. Get together experts, estate planning attorneys and accountants to create a specialized plan for you and your family.
- Consider incorporation. Becoming a formal legal entity can help ensure continuation of a business and also provide limited liability for its owners.
- Train successors well. Training successors will help them love the farm just as you do, and the process can take years.
- Document a vision. Help future generations understand future goals for the farm set by current owners
- Develop a buy-sell or stock-restriction agreement. An agreement can obligate one owner to buy and another to sell his or her interest in the farm by a triggering even, just as a death or incapacity. It can also be structured to control how ownership interests may be transferred to non-family or off-farm family members
- Have an insurance plan. Life insurance can provide needed liquidity when a triggering event such as death brings about sale of an ownership interest
- Discuss plans with individuals involved. No need to surprise family members or others.
- Review and update a plan periodically. Changes in laws or tax code may require adjustments to a plan, as well as changes in personal life and family situation also require a plan update.
See Amy E. Ebeling, Farm Succession Planning, Ruder Ware L.L.S.C., November 15, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.