Friday, May 19, 2017
The succession of the family farm has changed in the face of an increasingly mobile society. With more and more family members choosing alternative career paths, commodity volatility, increased regulations, a tighter lending environment, and liability for farm owners, the chosen successor for a family farm is integral to protecting the long-term viability of the business. Farming, especially on larger scales, requires knowledgeable, skilled leadership that not all beneficiaries are able to provide. With corporate and estate planning, a viable leader may be chosen from among willing and able family members; if needed, a successor may also be chosen from an outside source.
Aside from choosing a competent individual as a leader, the retention of key employees is another major concern. If the future of the farm becomes uncertain, highly qualified employees may take the disruption as a chance to find more stable employment. A lack of leadership or uncertainty may also be a cause of concern for suppliers, lenders, and customers. By having a well-defined plan for succession, potential problems among these groups may be mitigated or avoided entirely.
A clear and intelligent plan for succession also avoids intra-family litigation. Many family farms have fallen subject to lawsuits borne from family squabbles. These suits can negatively affect the land usage as parcels are divided among family members to resolve their disputes. Careful design for future land ownership may circumvent future litigation. Finally, a paramount concern, federal estate taxes. Properties valued over a set threshold may be subject to a 40% estate tax due within nine months of the decedent’s passing. This can be unduly burdensome for a grieving family without a succession plan. If unprepared, the beneficiaries of the estate may be forced to sell the land to any bidder in order to pay the taxes.
Farm families take pride in their land and it tends to form a part of the family’s identity. For continued prosperity, a comprehensive succession plan provides the best chance for the property’s future.
See E. Bradley Evans & Matthew W. Thompson, Succession Planning—Bet the Farm on It, Ward and Smith, P.A., May 12, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.