Securing your farm's legacy through estate planning

The following information is provided by Nationwide®, the #1 farm and ranch insurer in the U.S.*

Not many farmers look forward to the estate planning process. But it’s massively important in maintaining valuable farm assets and property for farmers and farm business owners. A farm succession plan should include a few key components that preserve an estate for future generations.

A farm transition or succession plan can be carried out anytime. An estate plan is carried out only upon the passing of a primary business proprietor. It involves the compiling of key documents to secure the family farm's future and includes how assets will be transferred to a successor. It's especially important when there are heirs and other family members involved in an operation.

What goes into a good farm estate plan

Proactive estate planning starts early and has major financial benefits. It can help minimize estate and income taxes paid in the process of transferring assets to heirs and non-family successors. It also helps minimize the chances that farm assets will be “in legal limbo” and can ease the financial burden of succession on family members. In addition to establishing feasible timelines for asset transfer, an estate plan includes key documentation including:

• Major roles in the estate like beneficiaries, guardians and executors
• Wills
• Trusts
• Power of attorney (medical and financial)
• Beneficiary forms and designations
• Life insurance

“Being organized is critical to the creation of successful farm succession plan,” said George Schein, Technical Director with Nationwide Retirement Institute, and 6th generation of a farming family dating back to the 1870s. “No one ever wants to think about what happens when he or she passes away. But having the conversation and getting started on your estate plan early on can make the process easier than when a loved one is ill or near the end of life.”

Common challenges in the estate planning process

The value of farm assets and dividing them up among successors and heirs is often a major challenge in creating an estate plan. Dividing up assets equitably doesn’t always mean everything is equal. “Fair isn’t always equal, and vice versa,” Schein said. “In planning how assets will be passed to the farm’s next generation, make sure they’re in the right hands for whatever the operation’s future holds. If it will remain a working farm, the estate plan will be structured differently than if farm assets are liquidated. Consult an estate planning attorney for what will work best in your situation.”

Involve the right people in estate planning

Building an estate plan hinges most on having the right people engaged in the process. Any family members or non-family heirs who will one day be a farm’s successors should have a seat at the table. In addition to an estate planning attorney who is familiar with a farm operation, farm team members like farm insurance partners, accountants and financial advisors should be involved.

“Although estate planning for farmers entails a sequence of business decisions, the decisionmakers are also family members, which often means those decisions may be impacted by a lot of emotionally complex relationships. And it should, because in many cases, it’s about sustaining a farm family legacy. That’s why it’s always good to involve family members who have a vested interest in the farm’s future,” Schein said. “Planning ahead well in advance can help take some of the emotion out of the process. That way, you can move forward with confidence when the need arises.”

Visit AgInsightCenter.com for more resources and expert tips to help you run a successful business and maintain the safety of your operation.

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