The family farm is more than just a farm – it is a business and a legacy. For this reason, one should begin to plan the transfer of one’s Tennessee family farm sooner rather than later. Successful Farming shares three popular succession planning methods farmers can use to transfer farm operations to heirs.
The first succession planning method involves using a will. A will is the simplest of estate planning documents and allows one to transfer a family business and its assets to heirs via a simple document that explains his or her wishes. If a person’s estate is worth less than $11.4 million, he or she can transfer the estate tax-free. He or she can also take advantage of the portability feature of the American Taxpayer Relief Act to pass on any remaining exemptions to his or her surviving spouse upon death.
The second method one can use to transfer farm operations is a planning will. One can set up a planning will in a number of different ways, but one of the most popular methods is via a testamentary trust. With a testamentary trust, a farmer can continue to use the farm’s income while the trust protects the principal value of the farm for heirs.
The third method involves using a revocable trust. A revocable trust allows individuals to avoid probate costs and keep the transfer of assets and the property off public records.
The University of Wisconsin-Madison, Dane County Agriculture Division Extension shares tips for successfully transferring the family farm. For one, the division suggests starting the estate planning process sooner rather than later. Starting early gives a family plenty of time to transfer assets, adjust to role changes and devise a plan for the future. It also allows a family to establish protections from a nursing home.
The division also suggests that parents be fair, not equal. If one child has been a part of the family farm operations for decades while the other is barely involved, it is okay to transfer most or all of the share to the involved child. By being fair, parents can ensure that the farm continues to prosper in the future.
That said, non-farming children may also desire a share in their parents’ assets. Parents should discuss estate plans with all children and ensure each is aware of their intentions. Prior discussions can prevent hard feelings toward the child to whom the parents left everything.
Finally, farm owners should get everything in writing. Though pride requires many to honor a verbal agreement or handshake, the law does not. To prevent disputes from arising upon one’s death, one should get all agreements, wills and land contracts in writing.