Farm transfer planning ensures that the transition of ownership and control of your farm and business assets occur as you intend. It is also ensures your land stays productive in the hands of another farmer or rancher. The information on this page is not a substitute for good legal and financial advice. After you read this information, be sure to seek the professional assistance you need to complete your farm transfer plan.
Farm transfer planning is a process and can take several years to complete. It involves transitioning the management of the agricultural operation, building new management capacity, transferring farm assets (land, buildings, equipment and livestock), and developing a long-term plan to ensure financial security and peace of mind for you and your heirs. It is never too early to get started! These resources outline initial steps toward developing a farm transfer plan.
The information on this page is not a substitute for good legal and financial advice. After you read this information, be sure to seek the professional assistance you need to complete your farm transfer plan.
A good way to start the planning process is with a personal financial inventory. What business and personal assets do you own? What are they worth? What debts do you have? To plan properly, you must know your financial worth.
View WorksheetThe planning process should be driven by your priorities and goals for your farm or ranch business, agricultural land and long-term financial security for you and your heirs. Discuss and articulate your underlying values with your family and advisors. Everyone may not share all of the same values or priorities but it is important to have them out on the table at the beginning of the planning process. If planning is done successfully, you should be able to achieve a variety of personal, business and financial objectives.
Once values and goals are established, questions or issues will arise. For example, once a business entity is identified then you will need to determine how to structure, manage and transfer it. Working with advisors to choose the best tools will help move the process forward.
A team of advisors is needed to help with the many pieces of farm transfer planning. A farm business consultant, lender, accountant, financial advisor, land-use planner, or conservation planner/land trust representative can help with farm business and land-use issues. A lawyer, tax consultant, insurance agent, financial advisor, retirement planner or estate planner can help with legal, financial or asset management questions. Some individuals enlist professional mediators to help negotiate complex family dynamics. Many states, either through the Cooperative Extension System or State Departments of Agriculture, offer agricultural mediation services.
This section outlines a few of the frequently used tools and strategies to help you protect your land and achieve your farm transfer goals. You can work with your team to choose the approaches that address your unique issues and priorities.
The basic forms of business organization include sole proprietorship, partnerships, corporations and limited liability companies. Each has its advantages and disadvantages in terms of organizational complexity and transfer perspective. A sole proprietorship is fairly simple. A corporation requires more time and attention to form and maintain. In between are partnerships and limited liability companies, which combine attributes of individual and corporate ownership. From both a management and asset transfer perspective, each offers advantages, depending on the family and business needs of your situation.
A buy-sell agreement can ensure the orderly transfer of the farm or ranch business. As part of a partnership, corporation or limited liability company farm business arrangement, a buy/sell agreement could set the price and terms of any buyout and should address possible financing options. It would also ensure that the next generation could plan for their farm’s future as well.
A conservation easement is a deed restriction landowners voluntarily place on their property to protect productive agricultural land, wetlands, ground and surface water, wildlife habitat, historic sites or scenic views. An agricultural conservation easement (ACE) keeps land available for farming. A wetlands easement is designed to restore and protect wetlands and their associated upland acreage.
The sale of a conservation easement can generate cash to buy out business partners or other family members, make farm improvements, help fund retirement, and create equity among heirs. The donation or sale of an easement can lower the value of your estate which helps make the land more affordable for the next generation.
State and local governments administer purchase of agricultural conservation easement (PACE) programs which pay property owners to place a conservation easement on their property; land trusts also may purchase conservation easements or accept them as donations. The federal Agricultural Conservation Easement Program (ACEP), administered by the USDA Natural Resources Conservation Service (NRCS), provides funds to help conserve and protect farm and ranch lands, grasslands and wetlands.
For estate planning purposes, a gift is a lifetime transfer of assets for which no payment is received or less than market value, also known as a bargain sale. Well-planned gifts can be an effective way to transfer assets, often tax-free.
Life insurance should be considered as part of a comprehensive estate plan. Term and whole life are the two basic types of life insurance policies. Term life insurance is a contract that will pay benefits if the insured dies during the term of the contract; it is the less expensive of the two kinds of insurance. Whole life insurance provides death benefits, which are similar to those of term insurance, and gradually builds cash value over time as premiums are paid. Life insurance can be used to fund buy/sell agreements, replace the value of assets that have transferred to another family member, establish trusts, provide for non-farm heirs, or pay estate taxes.
A living will is a way to state your wishes regarding treatment should you become terminally injured or ill. A health care proxy allows someone else to make critical medical treatment decisions for you. Through power of attorney you can designate the same or another person to act on your behalf regarding financial and legal matters. These documents make it possible for you to choose someone to make difficult medical and financial decisions in the event that at some point you cannot make them for yourself.
Trusts are legal arrangements under which assets are managed by a trustee for designated beneficiaries. Assets are often placed in trusts to provide for their professional management. The trust document also designates who will receive the assets once the trust terminates. They can provide financial security for surviving spouses, children and grandchildren. There are a variety of types of trusts so work with your team, your accountant or attorney to choose the one best for your situation.
A will is a legal document that provides instruction about how your estate will be distributed after you die. Revisit your will periodically, especially when important family or financial circumstances change, such as when a child is born, a person important to the farm business dies or a family member makes it clear that he or she has no interest in working in the farm business.
The Cooperative Extension System is a nationwide, non-credit educational network. Each U.S. state and territory has a state office at its land-grant university and a network of local or regional offices with experts who provide useful, practical, and research-based information to agricultural producers and small business owners. Extension also delivers Annie’s Project, a program designed for farm and ranch women, with a component focused on farm transition.
In 1916 Congress enacted a law to establish the Farm Credit System (FCS) to provide a reliable source of financing for farmers. FCS is a nationwide network of borrower-owned lending institutions and specialized service organizations that provide loans and other services, including assistance with farm succession, transfer and estate planning.
Farm Credit NetworkFarm link programs connect beginning farmers and ranchers with retiring ones and land seekers with landowners, but some also offer assistance with farm transfer and succession planning. These programs may be administered by state agencies or nonprofit organizations.
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