Farm Table says:
The Guidebook opens with “Congratulations! While far too many farming and ranching families wait until it is too late, you are now embarking on the farm succession planning process. You’re in for a difficult but highly rewarding journey!”
Farm succession planning (or farm transfer planning), is the process of mapping the transition of the family farm business, land, and assets from one generation to the next. When it comes to passing down the family farm, a simple estate plan cannot fully cover the intricacies of the transition.
The introduction notes that some professionals you may need during the process include:
- An accountant or CPA to advise on financial and tax management
- An agricultural appraiser to value the farm business and property
- A lawyer to assist with the estate planning and legal documentation
- A moderator or facilitator to ensure honest and respectful communication and shared an understanding of the goals and wishes of each generation.
- There are also consultants and organizations that specialize in family dynamics, family meetings, and financial planning that can help the process proceed smoothly.
It also states that there should be four goals to enable a successful farm transfer:
- Transfer ownership and management of the agricultural operation, land, and other assets;
- Avoid unnecessary transfer taxes (income, gift, and estate);
- Ensure financial security and peace of mind for all generations;
- Develop the next generation’s management capacity.
Some strategies for successful farm transfer recommended by the American Farmland Trust (Farm Transfer, AFT):
- Annual gifts of assets can help transfer the business and reduce transfer taxes;
- Buy/Sell agreements can ensure an orderly transfer of the farm business;
- Life insurance can be used to fund buy/sell agreements, establish trusts, provide for non-farming heirs or pay estate taxes;
- Limited partnerships or corporations can allow separation of management and ownership of the business if desired;
- Long-term care insurance can protect family assets from being used to pay for nursing home costs;
- Minority discounts can substantially reduce transfer tax liability when minority interests of family farm businesses are transferred;
- Purchase of agricultural conservation easements (also known as purchase of development rights) can protect farmland, reduce taxes and provide cash for retirement and estate planning needs;
- Transferring management responsibility and asset ownership gradually can provide a smooth transition for the agricultural operation from one generation to the next;
- Trusts can provide financial security for surviving spouses, children and grandchildren.
This Guidebook has six chapters that link out to other resources. The complication of resources are organized by key subject areas and there are also worksheets to guide the process.