HobbyFarms.com


Your E-mail:
Hobby Farms - Current Issue

Urban Farm Magazine

Printer Friendly

Lemons Versus Lambs: What to do When You Inherit the Family Farm

These 10 tips will help you and your family manage the future of your farm’s estate.

By Judy Burns


Use these steps to make sure the inheritance process goes smoothly
Photo by Lisa Munniksma
When it comes to inheriting the family farm, planning ahead will assure that your relatives' wishes are met.
Since 1784, generations of the Poindexter family have called our patch of Virginia clay “home.” When my father departed to that big barn in the sky, he left behind a farm with sheep, rusty fencing, and a bumper ironweed crop in addition to a tradition of determination and family devotion. Most agribusiness heirs face the same decisions that confronted our family. The following considerations unify what our family members wish we had known about our family farm before our father’s passing and what we have learned in the years that followed. 

1. Develop a transition plan.
Discuss your relatives’ wishes for the family farm before a health or financial crisis arises. An attorney who specializes in estate planning can guide you in determining arrangements that are appropriate for your family’s needs, such as a deed with lifetime rights for the current farm owner, a revocable living trust or a traditional business structure (i.e. sole proprietorship, partnership or limited liability corporation). Additionally, your local cooperative extension offers invaluable farm-transition workshops. Successful transition from the farm’s past to its future relies upon communication and collaboration. 

2. Put your cards—and money—on the table.
Encourage the current farm owner and the farm’s accountant to discuss the financial status of the farm.
 
Request clarification of the following:
    • Current value of the farm’s assets and investments, including revenue from products or services

    • Operational expenditures plus labor costs 

    • Marketing strategies and production practices

    • Payment schedules, interest rates and rate caps on any loans (Is refinancing a possibility? Do the loans require payment in full at the time of the borrower’s death?)

    • Taxes (What are the inheritance and estate taxes? Does the farm qualify for a lower property-tax rate through a Land Use Program? Contact your county’s revenue commissioner for a list of the requirements.)
3. Protect the farm.
Discuss how the farm property can be safeguarded from lawsuits, especially those involving bankruptcy or a divorce settlement. A prenuptial agreement, family limited partnership agreement or incorporation of the farm might be beneficial depending on your state’s laws. 

Furthermore, consult your insurance company to see if a farm or umbrella liability policy is warranted and to ensure that the farm’s vehicles and equipment are adequately covered. 

4. Take inventory.
Note the number and condition of seedbeds, livestock, and large equipment. Establish and maintain accurate records.

5. Establish goals that are important to you and your family.
Realistically evaluate your interests and capabilities in order to attain your aspirations for the farm. Decide what you want to achieve: improved quality of life; supplemental income; tax deductions; retirement property; preservation of the family farm for subsequent generations; personal satisfaction; et cetera.

6. Organize.
Use a calendar, a notebook, a Microsoft Excel spread sheet or agribusiness software to record your farm’s income and expenses. Keep receipts and record mileage for farm business. Confer with your tax professional for advice, and review the Internal Revenue Service website. Read “Publication 225 Farmer’s Tax Guide” and “Ten Things You May Not Know About Farm Income and Deductions.”

7. Learn by doing.
Read, research and ask questions about the farm. Know what purposes best suit your farm’s land and location. Should your farm produce lemons or lambs?  Experiment with traditional or innovative crops, livestock and services. Seek advice from a mentor, such as a retired farmer. Attend workshops offered by your local cooperative extension, farm service agency or college. Join agricultural cooperatives or associations. Additional information in your area of interest can be obtained from your state’s agriculture department and cooperative extension service as well as the USDA.

8. Pennies make dollars.
Be wary of the old joke “How do you make a small fortune by farming?  First, begin with a large fortune.” Ascertain the needs versus the wants of the farm. Budget funds accordingly, and always compare prices for supplies. 

9. Know thy enemies and thy local laws.

Your county cooperative extension agent will work with you to determine the best ways to resolve dilemmas from coyotes to cutworms as well as soil erosion or land encroachment.

10. Give back your time and talents.
Support your local 4-H Club and FFA. Promote agriculture by purchasing a farming license plate for your car or truck. Advocate for agricultural policies by contacting your senators or representatives in Congress. Foster global farming initiatives by donating to charities such as Heifer International.

About the Author: Judy Burns is a 1984 graduate of Virginia Tech.  She lives with her family in the Central Virginia area, teaches high school history, and raises hair sheep and companion donkeys.

 Give us your opinion on
Lemons Versus Lambs: What to do When You Inherit the Family Farm

Submit a Comment
Reader Comments
good info
a, b, VA
Posted: 5/20/2010 8:51:23 AM
So! If we have a Co-op with four family members and we have 150 acres with some agriculture and some commertial with a rental: What' the best to do. The taxes in Bemidji Mn are 36,000 a year. Help us determine if the barn and the quanset should be taken down. Ann P. (Tarutis) Bemidji, Mn.
Mrs. Analee Potrament, Mesa, AZ
Posted: 4/29/2010 5:12:05 PM
Estate planning can be a big headache, but it is worth it.
J, Longmont, CO
Posted: 1/9/2010 8:12:02 AM
some good tips
mary, lleoti, KS
Posted: 12/21/2009 7:13:21 AM
View Current Comments

Name:
Address:
City:
State:
Zip Code:
Email:

Product Spotlight
Hobby Farm Rewards 
Member Login »

facebook


Information on over 200 horse breeds