# Succession Planning



## CowboyRam (Dec 13, 2015)

Yesterday dad and I attended a farm and ranch transition conference. I am not sure it has helped us on how to smoothly transition the farm from dad to me, but it has given us some things to think about. As far as the day to day operations I have already started making some of the operational decisions. One thing I did get out of it was things don't necessarily have to split up equally, but they need to be fair. I believe that I will take on the responsibly of the farm, and my sister the commercial property that mom and dad have in colorado. Although I don't think she would be capable of running it, but she could always hire a real estate company to manage it for her. I do think it gave dad some things to think about, and he may have to take another look at his trust.

This has made me think a little about what is going to happen when it comes time for me to transfer the farm to my son, that is if he wants it. At this point I don't think that is going to happen, so I am not sure what I am going to do. One question that I am going to have to think about also is what happens if I get remarried; at my age most likely anyone marry will have kids of her own. I need to make sure that she does not cut my son out, but at the same time I am going to have to make sure she is taken care of.

So have you thought about how your farm or ranch will transition to the next generation? if not maybe you better start thinking about it; do something about it. Is your operation in a position where your kids can continue farming. I think we spend so much time worrying about day to day operations, but don't think about how we are setting up our kids to succeed. If we fail it could turn out that our kids will not be able to continue farming.

Just some food for thought.


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## IHCman (Aug 27, 2011)

I couldn't agree with you more.

Its great that you and your Dad are thinking about this. Some parents are not so easy to talk with about transition.


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## NewBerlinBaler (May 30, 2011)

Most of my land is forested and I don't have any kids. I'd like the property to stay natural & wild forever so what to do? Talked to my lawyer about this and here in PA there's a way forward.

She will set it up so that I will own the land in perpetuity. Also, I'll set up a trust that will cover the property taxes, insurance, etc. There's a local land conservancy that will manage it and that includes having members walk the property at least once a year to ensure the neighbors aren't encroaching, there's no dumping, etc.

I could simply deed the land to the conservancy upon my death - they'd love that. However, conservancies have a nasty habit of selling certain properties to free up capital so they can buy other properties they deem more desirable. For example if the conservancy owns land and a neighboring tract comes on the market, they will often times try to buy it to build a larger contiguous tract.

I have an emotional attachment to my land, two of my dogs are buried there and besides, it's the coolest thing I've ever owned.


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## Farmerbrown2 (Sep 25, 2018)

I'm one of two boys my brother is five years older than I , my brother never had much interest in farming not that he would not help when forced to . My father got diagnosed with stomach cancer at 64 after going to the doctors for 2 years with them checking for heart problems. Six months later he was gone.

So now I get to deal with mom (we are oil and water) at this point I figure I will be moving on. I'm married with two children at this point and my brother still lives at home on the farm . For whatever reason my mom wants my wife and kids to move to the farm I agreed to pay for her to build a new house. But brother had an off farm job just like I do but he was to lazy to put coal on the furnace or feed the couple steers left in the barn when dad passed. Then he had the nerve to tell mom and I he wanted her to sell the farm he wanted his half of the farm.

Long story short I ended up on the farm 5 years later believe me sometimes I wanted to walk . Mom and I are still oil and water but we make it work . My wife is a saint for putting up with her.

I think about who will end up with this old farm if all four of my kids want to move on so be it I don't want to hold them back if some want to stay we will figure it out . I agree it's never to early to think about farm succession.

To many people worry about what's fair and not what is right. If one child stays on the farm and works for it then they should get it . Those that move on need to make there own fortune not demand the one that stays to pay up when mom and dad die.


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## danwi (Mar 6, 2015)

Another thing to think about is what happens when an elderly parent ends up in a nursing home, that can eat up all the equity in the farm. A friend went to one of those meetings a couple of weeks ago and he said if you sell or give the farm to the kids the nursing home can come after the farm like if you sold it on land contract for seven years now. He said it used to be 5 years and they want to raise it to 10 years. I know of one young man that expanded the family farm and both parents are now in the nursing home his dad had a bad stroke. The young man is an only child and thought he would inherit the farm. Now between the low milk price and his parents in the home it doesn't look like it will end well for him. His health and marriage are suffering. My dad and I settled on a price and I have been making payments for 10 years so far. That way dad can give my sisters cash and they can't say any thing, well they can say some thing but oh well.


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## PaMike (Dec 7, 2013)

Consider it a blessing if your parents will even have meaningful conversation about the future. My parents are 71. I have been farming the ground for 16 years. They still won't discuss the future and their lack of planning....


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## endrow (Dec 15, 2011)

Raising nursing gift look back to years that will make things worse


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## Tim/South (Dec 12, 2011)

I have a son and a daughter. I told them to decide what was fair and that is what I would do. My only stipulation is it would remain in Ag. If only one of them wanted to farm, they could rent free, just pay the taxes on the other's part.


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## PaMike (Dec 7, 2013)

Tim/South said:


> I have a son and a daughter. I told them to decide what was fair and that is what I would do. My only stipulation is it would remain in Ag. If only one of them wanted to farm, they could rent free, just pay the taxes on the other's part.


One of the main points I have seen in succession planning is that fair doesn't always mean equal...That's something some parents just don't understand.

These multigenerational farms can be a great blessing, but they can also be a tremendous burden to the owner, especially in older age. Sure the farm could be worth millions but that's the last thing on the owners mind.


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## Palmettokat (Jul 10, 2017)

Fair as has been said not necessary the same. If not badly mistaken it is 60 months look back in South Carolina on government look back including the Federal Government. Quick look on internet shows that also.

We have recently updated our wills on this but have one more step thinking on and have talked with attorney on. Considering setting up company to own the farm and children have a "share" of that company but keeping it as working farm. It is my impression depending on how this is done there is no record of who owns what percentage of the company so easy to move ownership. Will know they will have to make decision at some time if development in this area continues that it gets sold to developer. Will be a sad day.

A tool that can help in this type of planning is permanent life insurance. It can provide money to buy out the one or ones who are not getting the farm. The farmer can own the policy or the child who is getting the farm. But it all needs to be obligated what happens and how each party is obligated.


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## Palmettokat (Jul 10, 2017)

PaMike said:


> Consider it a blessing if your parents will even have meaningful conversation about the future. My parents are 71. I have been farming the ground for 16 years. They still won't discuss the future and their lack of planning....


To some 71 is young and plenty of time and to others it is way late to be planning. Often people hating to face the end of life do not want to admit it and planning makes US face it.

PatMike, there could be something you are not aware of. Could be what their parents did or another family member or friend. However there is no reason you can not approach the issue and prepare in case they do nothing. That may be a sober conversation with them on what impact with even possible loss of the farm if nothing is done. You have to prepare for what they are not doing.

I would advice anyone to talk at least two advisors for no one has all the best ideas. Advisors come in all kind of labels, attorney, financial planner, insurance agent, tax attorney, sure there are others.

No doubt there is variance in this cost depending on area of nation and level of care needed but was in conversation two weeks ago on this and long term care facility gave me $6,500 as base line but $7,500 per month more likely while an Assistant Care Facility which is not for wheel chair or bed patients began at $3,500 for the room, meals cooked and cleaning. They charge think it was $700 per month to pass out your medicines if you are not capable of keeping up with your medicine. But seems around $5,500 is more normal price when the needed extras are added.

If you get into long term care insurance you need to consider the Partnership Plans that in most states help protect the estate better if Medicaid ends up paying any part of their health care or long term care. Partnership Plans are a class of plans and a company can have both those plans and those which are not. Based upon personnel experience and professional experience can tell you at least here it is much better chance of getting into necessary care where you prefer. Medicaid in our state limits your options with a farmer here ending up nearest location when he had to go over a hundred miles from home.

There are a variety of options, some easy others not but time is needed in all of the options I know.


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## PaMike (Dec 7, 2013)

I hear you Palmettokat. Unfortunately my parents have a history of ignoring issues on both the business property and the farm property.

They just think it will all get worked out between the 3 kids when they die. As my dad says "why wouldn't they(my siblings) want it? They are getting it for free.) He misses so many points its scary...

My plan is to liquidate and retire when my parents pass and the farm/business property gets sold.


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## Palmettokat (Jul 10, 2017)

PaMike, maybe something a friend or other says or experience will wake them up.

You know your parents and family but you may watch for info on family farm being lost to taxes or such in the news (in print) will help them understand. Then it may offend them. Hope your well here.


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## luke strawwalker (Jul 31, 2014)

farmerbrown said:


> I'm one of two boys my brother is five years older than I , my brother never had much interest in farming not that he would not help when forced to . My father got diagnosed with stomach cancer at 64 after going to the doctors for 2 years with them checking for heart problems. Six months later he was gone.
> 
> So now I get to deal with mom (we are oil and water) at this point I figure I will be moving on. I'm married with two children at this point and my brother still lives at home on the farm . For whatever reason my mom wants my wife and kids to move to the farm I agreed to pay for her to build a new house. But brother had an off farm job just like I do but he was to lazy to put coal on the furnace or feed the couple steers left in the barn when dad passed. Then he had the nerve to tell mom and I he wanted her to sell the farm he wanted his half of the farm.
> 
> ...


Absolutely... couldn't agree more! OL J R


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## luke strawwalker (Jul 31, 2014)

PaMike said:


> I hear you Palmettokat. Unfortunately my parents have a history of ignoring issues on both the business property and the farm property.
> 
> They just think it will all get worked out between the 3 kids when they die. As my dad says "why wouldn't they(my siblings) want it? They are getting it for free.) He misses so many points its scary...
> 
> My plan is to liquidate and retire when my parents pass and the farm/business property gets sold.


Sounds too familiar...

Later! OL J R


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## Palmettokat (Jul 10, 2017)

We are working on this for our property and have been for a while with attorney and now need to get with accountant.

Set up (in our state) an LLC which buys the farm and we own the LLC. The LLC must be setup with it own identity meaning it is not filed on our tax return and yes that does create a separate tax return and cost and some other cost but follow the benefits.

It does not show as a person and the ownership of the LLC is not reported nor recorded any more than is the ownership of common stock of any C corp. It is the LLC who keeps that keeps that info. So if a claim is made against me as a person or my estate the LLC is protected and can easy and quickly be moved.

There are rules that must be followed and kept for this for over time the LLC will be closed and selling what it owns or over time it will grow to become a larger company, either way records must be in place to prove the officers of the LLC have legal authority to act. But it does work to protect the family farm from estate taxes, Medicaid liens, and other such items. Well as much as we have been able to determine so far...again accountant has not weighed in and there is some give up in this setup such as in SC at 65 there is reduction in property tax on your home and that is loss and so is the homeowner lower tax rate than the non owner occupied house. However have not discussed this with attorney but I think you might could have the LLC to make a loan to you on your house which is recorded for large percentage of it's value with loan being a interest only loan and jumbo principal single payment so many years down the road. Then they will have first claim on the house other than property taxes in most cases.

We have NOT done all the property tax issues yet but think this will be big benefit for us. One other thing is the property must be bought and not given to the LLC. This has negative and positive, if you are giving property to a family member at your death it normally gets a step up in basis for value and with current estate tax law probably no estate taxes unless a very large estate. However if you have some property the city, county,state of such want to take for their use it gives you a way to still own the LLC which bought the land at a value you establish. must be reasonable, that the government now must bargain from rather than a value on the land which record on were much lower.

Short, talk to those who know the rules for what works for one is not the best option for all.


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