Succession Planning for Farm Families
In a recent study, the United States Department of Agriculture (USDA) found that family farms make up 98% of all farms in the US and 84.2% of all farms in Illinois. However, an estimated 70% of US farmland will change ownership in the next 20 years, much of it out of family hands. Without the proper planning in place, many family farms will end up being sold in full or in part to outside buyers.
Losing a farm that has been family-owned for generations happens more often than you might realize, and often the causes are entirely preventable. While it is nice to believe that your children will be able to cooperate after you are gone, that is not always the case, and even if they do get along they may be overwhelmed by the decisions necessary to manage the business. There may be issues with Medicaid or other governmental entities that can cause a forced farmland sale. For the greatest likelihood that your farm will stay in your family long-term, it is important to think about the generational transition as soon as possible. Here are some questions to ponder:
What happens if your health declines and a new manager is needed to take over farm operations? Have you thought about who can take over managing the farm most effectively? Can you afford to lose income in order to pay a professional farm manager?
What if your health declines to the extent that you need to reside in a nursing home facility? Do you have liquid assets to afford $90,000/year or will you have to sell off part of the farm to pay for this? Normally, family farms are asset rich and cash poor.
What happens if you need to apply for Medicaid? Will the government put a lien on your farm property?
What happens if a child who inherits the farm get divorced? Will that child’s spouse be allowed to obtain interest in the farmland, thereby putting the future of the farm at risk?
What if your beneficiaries fight and force a partition action that splits up the land or forces a complete sale?
While all of these questions may seem as though they are far down the road, it is best to think about them while you are clear, healthy, and not facing any deadlines or physical challenges. It is never too early to begin planning for the survival of your family farm. Keep in mind that a good succession and estate plan will eliminate conflict within the family and headaches for everyone down the line.
A good farm succession plan provides:
- A plan for transferring operation of the day-to-day business of the farm;
- A plan to transfer assets according to your wishes when the time comes;
- A plan to lessen or avoid estate taxes; and
- A consideration of how Medicaid could affect your assets should you need extensive care.
At Thomas Mamer, we can help you set up a cohesive plan with your goals in mind for your family farm. Our attorneys have many years of experience in drafting succession plans for family farms in Central Illinois, as well as administering those plans when a family transition takes place. Contact one of Thomas Mamer’s estate planning attorneys today to create a plan that best fits your farm and your family. Let us help you carry on your family heritage that you’ve worked so hard to preserve.
Author: Litany Thompson
