The only child takes over the family farm once mom and dad retire or pass away. That might be the “easiest” scenario, right? For now, let’s not worry about tax considerations, access to capital or any other financial headache that could be involved in this scenario (of course, those could be significant factors).
In theory, succession could be straightforward with the parents’ will specifying the plans for the future and “junior” willing and able to either take over the day-to-day farmland operations or assuming full ownership while hiring someone else to farm the land.
But in many cases (most cases?), it’s not that simple, right? There could be myriad factors making succession plans more complicated.
“Obviously, tax issues play a major role in transition planning, but other issues are also present,” writes Roger A. McEowen, Professor of Agricultural Law and Taxation at Washburn University School of Law in Topeka, Kansas.
“Some issues can be addressed with careful planning,” he writes. “Other issues require the proper family chemistry. All issues require an openness to discuss and a willingness to work out.”
RELATED: 80% of farmers want to see their operations transfer to the next generation but less than one in five of them have a viable plan to do that, said AgriLegacy, a consulting firm that advises farmland operators.
That statistic paired with this advice from another agribusiness expert. “Succession planning is a very difficult topic to approach because it can be so overwhelming and wrought with emotion distress,” said Ron Hanson, Harlan Agribusiness Professor Emeritus at the University of Nebraska-Lincoln. Read the article here from Farm Progress on Hanson’s advice on “expecting the unexpected.”
McEowan’s career has surrounded him with the challenges of farmland owners. Among his professional stops:
Leonard Dolezal Professor in Agricultural Law at Iowa State University in Ames, Iowa.
Founder/Director of the ISU Center for Agricultural Law and Taxation.
Associate professor of agricultural law and extension specialist in agricultural law and policy at Kansas State.
Attorney with Kelley, Scritsmier and Byrne in North Platte, Nebraska.
Visiting professor of law at the University of Arkansas School of Law in Fayetteville, Arkansas, teaching in both the J.D. and L.L.M. programs.
Instructor at Washburn University School of Law in Topeka, Kansas.
The Drake University School of Law Summer Institute in Agricultural Law in Des Moines, Iowa.
And over that time, McEowan has learned which actions can put families in a better position as they plan for succession. The “dirt is in the details,” he wrote and that the level of complexity in making those plans depends on individual family’s goals and objectives.
Here are some primary strategies he encourages families to use:
Make sure the next generation starts off in a good financial position.
Create plans so the older generation can enjoy retirement.
Separate ownership/control interest from on-farm and off-farm heirs.
Minimize tax impact of property transfers.
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