Time to Transfer: Now What?
Retirement. That can be a daunting word for many farmers. What can be even more daunting, however, is transferring the family farm upon retirement.
Farm transfer doesn't have to be a frustrating, scary, feud-filled process, however. Especially when you seek help from professionals. “Transferring the family farm is a detailed process and requires the help of professionals,” says Gary Hachfeld, University of Minnesota regional Extension educator.
“The laws are complex and they keep changing. There are lots of costly mistakes that can be alleviated by using a professional.
“Sure, you could go online and download forms, but you could also end up paying taxes you wouldn't normally have to pay, and your assets may end up somewhere unintended,” he says. According to Sharon DeVaney, professor at Purdue University, a professional can help in the transfer, especially if there are communication or other issues within the family, including off-farm siblings being included in farm transfer.
“An advisor should try to learn the goals of the older person, and encourage them to make estate plans while in good health,” says DeVaney.
“Most advisors suggest that (off-farm siblings) be included in the planning for transfer, but the contribution made over the years by the child who stayed on the farm should be rewarded.”
When it comes to including the family in the transfer, many emotions can become involved. That's another good reason to work with an outside professional.
“A professional can play an intermediary role in helping the exiting generation think through their goals. They can also help by downplaying or eliminating family feuds in dividing assets,” says Hachfeld.
TO AVOID FEUDS from the get-go, it's important to set goals and have firm strategies for the transfer process. “The strategies selected depend on a number of issues, including finances of all parties, tax issues associated with each strategy and treatment of other non-farm heirs,” says Hachfeld.
“Once the transfer process has been established, an associated estate plan must also be drafted. The combination of a strong transfer plan associated with an estate plan can enable a farm family to meet its farm business goals.”
For information about starting the transfer process, and even bringing up a transfer, visit the Who Will Get Grandpa's Farm Web site (www.ces.purdue.edu/farmtransfer/index.htm) developed by DeVaney. It addresses different scenarios and strategies in transferring the farm.
The University of Minnesota Extension also has some helpful fact sheets that can be found online at www.cffm.umn.edu, and then clicking on Publications — Farm Management along the left-hand side. Then, scroll down to find the series on transferring the farm and estate planning.
Grant Schultz of VersaLand is an Iowa State University College of Agriculture Alum, and an expert in Agricultural 1031 Exchanges for estate planning. He can be reached at (319)277-1199 or at www.VersaLand.com