Farmers are oftentimes thought of as humble, honest and hardworking people. They’re not often associated with large estates and massive amounts of wealth. But the truth of the matter is that many farmers in Ohio have a lot of value attached to their land, their equipment, and their business operations.
It takes years, sometimes even decades, to build up an effective and efficient farming operation, and learning to keep it afloat can take just as long.
That’s why estate planning and farm succession are so important. If a farmer passes away with inadequate planning in place, then the farm will be distributed in accordance with the state’s intestate succession law, which might leave the operation in the hands of someone who doesn’t want to keep the farm running or simply doesn’t know what they’re doing.
What can be done to ensure proper farm succession?
Fortunately, farmers can take steps to protect their wealth and their farms while ensuring a smooth transition of operations when the time comes. Let’s look at some of those steps here:
- Create a complete inventory: Before a strong estate plan can be created, a farmer has to have a full understanding of their estate. Therefore, it’s helpful to inventory all assets, including equipment, livestock, feed, crops, structures, fencing, and accounts receivable. Once you have that inventory, then it’s a good idea to have those assets valued. That way the true value of the estate is known so that adequate plans can be made.
- Know family dynamics in light of the identified goal: Not everyone wants to follow in their parents’ footsteps. Therefore, a farm owner might have only one child out of several who is interested in continuing the family business. But that can complicate things if the end goal is to equally leave the estate to all children. Identifying who will take over the farm and how the estate will be distributed when the time comes is one of the most important steps to be taken.
- Ensure loved ones will have cash on hand: Although a farm can be extraordinarily valuable, a lot of that value is tied up in illiquid assets like land and equipment. But in order to take over the farm and ensure that business operations run smoothly, an heir is going to have to have enough cash on hand to keep things moving. Therefore, a farmer will need to ensure that there’s enough cash in their estate plan to ensure that succession is effectuated without disruption.
- Think about long-term care costs: Much of estate and succession planning focuses on what will happen when the property owner passes away. But that’s not the only event that can threaten the viability of a farm. A farmer’s need for long-term care, for example, can be extremely costly, which in turn will eat away at the farm’s resources and thus its viability and longevity. Therefore, it’s a good idea for a farm owner to also consider implementing an estate plan that will help cover those long-term care costs without putting the farm at risk.
Do you want to learn more about farm succession?
There’s a lot more that goes into farm succession and estate planning when a farm is implicated. While we hope that the information mentioned above gives you a good idea of how to start thinking about this issue, we realize that you’re going to need a stronger understanding of your options and what the process entails. That’s why we encourage you to continue to read up on this issue so that you can make the fully informed decisions that are right for you.