Farm Planning & Finances

Can the Farm make it to the next generation? Estate Planning: Part 1

This post may contain affiliate links

 

During my last year of teaching, I met a student who had a passion for agriculture and running his family operation but then a couple major things happened. Grandpa died, and the uncle wanted out.  One of these events alone can cause a mess on a family farm but both? They had no idea what to do! It collapsed their farm. Would you be in the same boat if this happened to you? Have you started estate planning to ensure it won’t happen to you are your family?

We hear so much that farming is a way of life. Too often we just expect things to go the way it use to when someone passes, Just leave it up to the next generation to figure it out. What happens if a son or daughter or even one of the grandkids want into the operation? Two questions always need to be asked:

  1.  Can the Farm Afford it?
  2. How can someone change their mind without destroying the farm?

Unfortunately, question 2 is not asked as often as it should be.  Death or even just somebody wanting to be bought out and start their own operation can have some severe impacts on not only the operation but also the family.

Most family farms are no longer single generations. They have grown and expanded in order accommodate other family members into the farm. Farming is a very costly business to get into so often other join an operation instead of starting their own to avoid some expense. Most farms today are supporting anywhere for 2-3 generations.  Most assets, land, animals and farm site are usually all held by only one name. Well, what happens if that one person wants out? What happens if that one person passes away or wants to retire?

  • How will your Farm Continue?
  • How do you want the farm to continue?
  • Can those who are left even afford the farm or pay any estate taxes?
  • What happens if they have to buy out a sibling who wants nothing to do with the operation?
  • Will everything be split equally according to price? What happens to those who have been working on the farm for years compared to those who never came back?
  • Will someone not understand your thinking and feel cheated?
  • What about grandkids? Do you want to give them the possibility of continuing the farm?

 

These questions go far too often unanswered and often either ends the operation or causes tension in a family.

So what if you are reading this and have zero assets to your name but are working on bettering the farm?

Ask yourself, What is the plan? Can I even afford to continue if something happens? If your answers are I don’t know, or you have nothing legal set up its time to have a very uncomfortable talk with your family.  It won’t be easy, and maybe you’re like me and have to bring it up over months, so they think it’s their idea, but you need to do it. It is not fair to you or the business to let it continue without a plan legally in place.

As a farmer, we are constantly at the mercy of nature. So we plan for that hailstorm or drought and pray it never comes.

It is time to prepare for that hailstorm for your operation.  Whether you are the majority holder or not it’s time to make a plan, and if need be, you can always change that plan later.

 

For a great book to learn and help you with estate planning Check out The Farm Whisperer by David Specht!

 

 

 

Who has the control of the Farms Future

 

Leave a Reply

Your email address will not be published. Required fields are marked *