I hold a special place in my heart for the family farm. My paternal and maternal grandparents were farmers. Their fields of peanuts, soybeans, tobacco, corn, and livestock fed our family and many others in South Alabama and the Florida panhandle. Like many of you, farming has been in my family as long as anyone can remember. It is a proud tradition, and one that contributes enormously to our local, state, national and global economy.
Once upon a time, agriculture employed four out of every five Americans. The number of people directly employed in agriculture today has dropped drastically. In fact, that number is currently around two percent. While the dynamic of the farming industry has obviously changed with time, estate and succession planning concerns remain a serious issue for farming families.
According to the USDA, approximately 96 percent of the 2.2 million farms in the United States are classified as “family farms.” The average age of today’s farmer is 57, and the fastest growing segment is those over age 65. Note that the average retirement age in our country is 67. The aging trend among farm operators indicates an increased need for planning as they reach an age when transition becomes inevitable because of death, disability or retirement.
When the time comes for transition, the farm owner may have limited options. Commonly, there are two: (1) maintain the farming operation while transitioning ownership to a child or grandchild; or (2) fold the operation and sell or lease the land. Most farming families would prefer to pass the ownership to a child or grandchild, but this option presents numerous roadblocks. Have you identified and trained potential successors? If you simply plan to divide your property evenly among your children or grandchildren, you have likely created a recipe for disaster. Without planning for all possible scenarios, funding the plan, and communicating your wishes to your family, you risk erosion of your family dynamic and the very operation you hope to preserve.
You can read about actual farm and ranch family experiences with transferring the farm in this article from Beef magazine.
There are numerous other obstacles to consider when planning for the family farm. For example, the inheritance, sale or lease of a farm often generates federal wealth transfer taxes. Absent significant liquid funds, the tax bill for selling or passing the family farm onto your loved ones could force a sale of the property or the need to incur significant debt.
Have you thoughtfully planned to avoid these sorts of pitfalls? There is no time like the present for the farm or ranch family to plan for the future. At The Coleman Law Firm, we appreciate and respect the tradition of the family farm. Our attorneys have the experience necessary to assist farm owners create plans for a smooth transition of their livelihood, promoting the continued success of operation and protecting the land and assets to the greatest extent possible against transfer taxes.
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