Land As Your Legacy
Keeping the Farm in the Family
There are currently 2.1 million farms in the US and 97% of those are family-run. Collectively farmers are growing older with a median age of 57 and according to the USDA, 70% of the entire farmland in the US will transition ownership over the next 20 years. The bad news is statistically only 30% of those transitions will be successful.
Donald Schreiber is an agent with Nationwide Insurance and they have established a program specifically geared towards educating farmers in regards to succession planning and helping them create a transition that makes sense for the family farm. The program, titled “Land as Your Legacy”, provides information on developing a transition plan that protects the farm.
According to Schreiber there are five elements to making a successful transition.
- Succession Planning – “Really think about what’s best for the farm”, states Schreiber. That might mean considering your heirs’ personalities and determining what roles they will take in the farm accordingly. “If one child is bad at handling financial affairs, don’t put him in charge of the farm’s accounting. Just because he is your oldest child, does not mean he has the best skill set to run your business. On the other side of that, be sure you’re having family meetings to discuss your plan so there are no surprises and ill feelings after you’ve passed.” If you do not want the farm to be split up, make sure you are structuring it correctly and working with a lawyer to make that happen.
- Business Planning – Take steps to ensure the farm remains profitable through the transition. Schreiber recommends setting up the farm as an LLC to ensure an easy legal transition and that bills can continue to be paid without interruption. He cautions that personal ownership of the farm is not a good idea and that operating agreements should be established to identify the roles of each participant.
- Risk Management – Be conscious of structuring the farm responsibly without one person having too much power. Have adequate insurance coverage and mitigate risk by keeping all machinery in good working order.
- Financial Independence Planning – Consider how you will maintain adequate income after you have transitioned the farm operation to another owner. Educate yourself regarding retirement planning and diversification of your investments.
- Estate Planning – Determine the distribution of all your assets after you have passed and the tax implications for that plan.
Schreiber notes “It’s important to go through this process in writing.” Determine your priorities, your goals and the objectives of your plan in order to make the decisions that are best for you. Rely on a team of advisors, such as lawyers, accountants and financial planners, to keep you on track and then periodically review and modify your plan if necessary. The goal, according to Schreiber, is to “strive for harmony within your family after your death.”
For more information about the Land as Your Legacy program, visit http://www.nationwide.com/farmer-estate-planning.jsp