Legacies should not be assumed
How often do you hear about a farm estate sale? Maybe it’s because of the realtors and auctioneers I know, but it seems like I hear of at least one every week. And with today’s land and equipment prices, I can’t blame someone for exiting the industry. Whether it’s due to the death of an operator, looming retirement, the desire to erase debt, or the lure of a steady job with a bigger, nicer house, family farms are transitioning and not necessarily to the next generation.
So why isn’t the next generation stepping up to keep the family farm in, well, the family? For many, it’s for the exact reasons I just pointed out. A lot of Generation Y – we often call them Millennials, but right now they’re 25 to 40 years old – would rather have their share of the estate to do with as they please. When transferring legacy farm ownership, it’s also possible others consider the cost of entering the industry prohibitive. Even if one of the heirs wishes to continue the family business, today’s prices can make it impossible for them to buyout the other heirs.
What’s a family to do that wants to hang on to the farm after the passing or retirement of the most recent operator? One option is to have an estate or successor plan in place. This usually comes at a price as an estate lawyer should be involved. Many see that as a reason to not have a trust or estate plan in place, but it shouldn’t be a hindrance. Try to look at the cost as a future investment in both the family and the farm. These tools can help the current operator have a voice in the farm’s future.
But what if a plan was never set in place and something must be decided now? There are a couple of options available. One is the Farm Service Agency Beginning Farmer loan programs. These programs can allow an heir to have as little as 0 to 10 percent down payment and more lenient terms than traditional real estate loans. A lender is still involved at 50 percent of the loan on their loan terms, and the FSA would be involved with a direct loan of 40 to 50 percent at very lenient terms. Either program would more than likely allow the heir to come to more favorable payments if they had to purchase the farm outright.
Another option is for the family to come to an agreement, which would again likely involve a lawyer, that would allow the heir or heirs to purchase the farm over a period from the estate. This option would allow the farm to continue production and for the estate or other heirs to receive compensation.
When it’s time for a family farm to transition, it’s not only wise to be aware of the options available, but it’s also important if the family farm is to remain that way. For some families, it might be best for the farm to transition to a new family. But if we are to keep the small family farm from becoming a thing of the past, we need to make sure that families are able to take advantage of all the available tools to help continue the cycle of success.
Jessica Allan is an agricultural lender and commercial relationship manager at Guaranty Bank in Carthage and Neosho, Mo. A resident of Jasper County, she is also involved in raising cattle on her family’s farm in Newton County and is an active alum of the Crowder College Aggie Club. She may be reached at [email protected]