Estate Planning 101
The U.S. Department of Agriculture 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 nonfarming children. What are parents to do? Treat children equally or fairly – and what’s the difference?
In a family with one farming and one nonfarming 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 nonfarming child may receive little. A third scenario is for parents to leave farming assets to the farming child and nonfarming assets to the nonfarming 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 nonfarming child or provide the farming child with money to purchase farming assets from their nonfarming sibling.
See more: 4 Essentials for Your Estate Plan
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.
See more: Keeping Farm in the Family
The Power in the Plan
Because of the importance of planning in the agribusiness community, COUNTRY Financial and Illinois Farm Bureau have collaborated to ensure families have the tools they need to begin conversations about the future. A winter seminar series featuring Ron Hanson, Ph.D., provides attendees with 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. What if we say, “Plan on attending one of the upcoming seminars. Get the conversation started, address pivotal issues and ensure the family farm operation continues.”
Joe Buhrmann is a Certified Financial Planner™ and manager of financial planning support for COUNTRY Financial.