MOULTRIE, Ga. — The USDA reports that 70% of U.S. farmland will likely change hands during the next two decades. Even more critically, it’s estimated that half of farming families are operating without an estate plan in place. Is your family’s legacy part of these statistics?
Keep it in the family
For many farming families, the first decision is to keep the farm “in the family,” though often with the added issue of farming and non-farming children. What are parents to do? Treat children equally or fairly – and what’s the difference?
In a family with one farming and one non-farming child, if the parents treat the children equally, each will receive a half interest in the farm. This could be considered unfair to the farming child who will work 100% of the farm and receive just 50% of the income. If the entire farm goes to the farming child, then the non-farming child may receive little. A third scenario is for parents to leave farming assets to the farming child and non-farming assets to the non-farming child. Oftentimes, though, there can be a significant imbalance in assets.
One way to solve this dilemma is through life insurance. By purchasing life insurance on the parents, an estate can be created for the non-farming child or provide the farming child with money to purchase farming assets from their non-farming sibling.
If not the family, then who?
Planning considerations change if there are no heirs or family members interested in maintaining the farm operation. A number of factors come into play, including your desire for retirement, income, care in infirmity and tax planning.
Review your options. Is there a neighbor who may want to purchase the operation? What about an employee? Could you help them “buy into” the business? Beyond just the ownership considerations, how do you transition control? Or, would a charitable gift of property make sense? Working with a trusted professional can help you navigate these alternatives and formulate a plan.
The power in the plan
Because of the importance of planning in the agribusiness community, your insurance provide should provide you with the tools, protection and ongoing support essential to legacy planning in order to allow the farm to continue in the family amid today’s financial challenges. If you’re a younger member of the family, focused on your own family and career – and your parents still own or are part of a farming operation – it may be time to begin addressing these pivotal issues.
4 essentials for your estate plan
Will: If you don’t have a written will, your state has an intestacy statute. Most individuals, though, prefer to have a say in the disposition of assets, so make sure you have a will and review it every 5 years or following major life events.
Durable Power of Attorney: This document designates an individual to conduct business for you, make gifts, conduct financial transactions and the like. Include successor designees in the event the named individual is unable to perform the role.
Advanced Medical Directive: Legal professionals often bundle together a Durable Power of Attorney for Health Care along with a Living Will (directions for final care and wishes) into a single document called an Advanced Medical Directive.
Financial Go-Bag: Regardless of the size of your estate, everyone needs a spot to organize all of their financial information. Besides basic items, such as birthdates, Social Security or military information, include tax records, banking, investment, insurance, business and real estate information, too. Don’t forget to include copies of the documents mentioned earlier and keep all of this in a secure location where family members or trusted individuals can locate.
–Bart Hester, COUNTRY Financial