In a recent study, the United States Department of Agriculture (USDA) found that family farms make up 98% of all farms in the US and 96% of all farms in Indiana. However, an estimated 70% of US farmland will change ownership in the next 20 years, much of it out of family hands. Without the proper planning in place, many family farms will end up being sold in full or in part to outside buyers.
Losing a farm that has been family-owned for generations happens more often than you might realize, and often the causes are entirely preventable. For the greatest likelihood that your farm will stay in your family long-term, it is important to think about the generational transition as soon as possible. Here are some questions to ponder:
What happens if your health declines and a new manager is needed to take over farm operations? Have you thought about who will be take over managing the farm most effectively?
What if your health declines to the extent that you need to reside in a nursing home facility? Do you have liquid assets to afford $70,000/year or will you have to sell off part of the farm to pay for this? Normally, family farms are asset rich and cash poor.
What happens if you need to apply for Medicaid? Will the government put a lien on your farm property?
What happens if a child who inherits the farm get divorced? Will that child’s spouse be allowed to obtain interest in the farmland, thereby putting the future of the farm at risk?
It is never too early to begin planning for the survival of your family farm. Keep in mind that a good succession and estate plan will eliminate conflict within the family and headaches for everyone down the line.
A good farm succession plan provides three things:
- A plan for transferring operation of the day-to-day business of the farm; and
- A plan to transfer assets according to your wishes when the time comes;
- A consideration of how Medicaid could affect your assets should you need extensive care.
At Gobel Justice & Pyle, our lawyers can help you set up a cohesive plan with your goals in mind for your family farm. Attorney Litany Pyle grew up on a farm in Fountain County and has many years of experience in drafting succession plans for family farms, as well as administering those plans when a family transition takes place. Give our office a call today and let us find a plan that best fits your farm and your family. Let us help you carry on your family heritage.