If you own a family farm, you have likely put a lot of thought into who will take over your operation. If you do not yet have an estate plan, you have the opportunity to create smart succession strategies that preserve your life’s investment.
Review these estate planning tips when considering succession for your family farm.
Plan to retire
Too many independent farmers fail to put aside funds for their own retirement. Even if you have no plans to step away from your business, you will one day need to pass the reins to your successors. When you do so, you want to have an estate plan in place that keeps the business running while providing a steady stream of income so that you can continue to live comfortably.
Consider a phased approach
If your children or other members of the next generation express interest in running the farm, be transparent about the work and finances involved in running the operation. Think about transitioning the farm gradually beginning five to 10 years before you plan to retire. For example, you might have your kids begin working on the farm when they start high school and take over in management roles after college.
Establish a separate business entity
If you do not already have a distinct legal entity for your farm, now is the time. Many family farmers choose a limited liability company for its flexible operation in which you can designate a number of owners who have distinct responsibilities and own shares in the business. This structure also protects your personal property from business creditors and legal judgments.
Farm Journal reports that fewer than 1 in 5 individuals who owns a family farm has made an estate plan that considers succession. Carefully consider everyone’s personal and professional goals in a frank conversation to begin this important process.