June 26, 2018
By Michael A. Dolan
Preserving the legacy of your family farm or ranch after your death is increasingly becoming a challenge for many in the agricultural community. Factors like rising land prices, cost factors that require larger and larger operations to remain profitable, and commodity price pressures require individuals to be very strategic in how they plan for the transition of their operation on their death.
When thinking about putting a plan in place to ensure that the family legacy continues, there are several critical factors you need to consider.
A high-quality plan matters
The biggest danger to preserving the legacy of your farm or ranch is the failure to put a high-quality plan in place in a timely manner. Many estate plans are not farm succession plans, but simple mechanisms designed to minimize taxation and avoid the cost of probate administration upon death. These simplistic plans are rarely effective at addressing the complex issues families face after death, and they are usually simple instructions — with no plan for effective implementation.
Predicting and addressing issues like how the division of assets among your children affects farm or ranch operations — and affects the relationships among your children — and how to effectively and efficiently transition the assets, are key elements to having a plan that produces the results you expect. Simply adding your children’s names to your ground is a common planning practice, but it is a recipe for disaster and can result in large, unintended tax consequences for your children in the future.
Planning sooner rather than later can also greatly increase the effectiveness of your plan. Many of the strategies that can address the challenges farm and ranch families face are strategies that can be most effectively implemented over time. If you wait until late in life to begin addressing this issue, there may not be enough time to implement available strategies. This can significantly limit the options available to accomplish your goals.
Leaving your children to work it out after your death is also unlikely to produce a result you would be proud of. Leaving instructions to divide your holdings one-fourth each among your four children will do little to preserve the legacy of your operations. Some of your children will be excited about continuing the operation, while some will want to cash out and do other things with their inheritance. Thinking ahead about what your children might do upon receiving the inheritance is important to accomplishing your objectives.
You should also consider if you and your spouse are on the same page regarding what you would like the outcome to be. If you are not, most basic estate plans leave all the control to the surviving spouse. I guess this works well if you know you are going to survive your spouse.
You invest in many things that are critical to your operation. Equipment, implements, seed technology and computer technology are all things designed to help increase yields and production efficiencies. You should think of estate and farm succession planning from the same perspective; it is an investment critical to your operation if you would like it to continue as a legacy after your death.
Dolan is the principal of Dolan & Associates P.C. in Brighton, Colo. Learn more on his website, estateplansthatwork.com.
You May Also Like
Current Conditions for
Enter a zip code to see the weather conditions for a different location.