Farmers know that something needs to be done to set up a succession plan for the family farm. But where should you begin? Start by identifying potential threats. What are the possible threats preventing the farm from staying in the family for generations to come?
In today’s litigious society, farmers must be aware of potential lawsuits stemming from accidents on the farm, operation of farm vehicles, or trespassers, horsing around, or perhaps simply passing through the farm property accidently. In addition to a proper umbrella insurance policy, many farmers utilize limited liability companies (or LLC’s) as a means of limiting their liability (as the name implies).
Nursing Home Costs
One of the biggest threats to farmers today is the cost of long-term care. Nursing homes can cost between $7,000 and $10,000 per month, and the cost continues to rise at a rate faster than inflation. A proper estate plan addresses the potential threat of long-term care costs and incorporates asset protection into the farm succession equation.
Once the farm passes on to the next generation, what happens if one child wants to farm, but the others want to sell? The time for addressing this situation is before the farm owner dies, not after. Contract provisions such as rights of first refusal can offer farming children the opportunity to purchase the shares of non-farming children, perhaps at a discount off of fair market value. If the buying child can’t afford it, the selling child may be required to finance the purchase, perhaps for fifteen to twenty years and the then-going rate of interest.
A solid estate plan considers all of the potential threats to keeping the farm in the family. The time to plan is before problems arise. You buy the plunger before you need the plunger. The attorneys at AlerStallings are here to help. Reach out to an AlerStallings attorney today to schedule a complementary one hour evaluation to make sure your estate and farm succession plans are up to the task.