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July 15, 2019
Anyone who owns agricultural land owes it to themselves and their heirs to have a good succession plan in place for operation of the property and transfer of ownership. No matter if the owner is a farmer, rancher, or a non-operating landowner, having a sound succession plan is extremely valuable for both financial and personal reasons. Time and time again, those of us in professional farm management and brokerage witness poor or non-existent succession planning that creates fissures in a family and lost wealth. Thoughtful planning can avoid future problems.
First, the current owner should have clear goals for what they want to see for the continued operation of their land and how ownership should transfer. For non-operating landowners, the first question to be answered is whether the next generation will continue to own the land or will they want to sell. How the property is owned or held becomes important in the transfer and future ownership. Legal and tax advice are important when deciding whether to own the land in a trust, as an individual, or within a LLC. If the plan is for the next generation to keep the farm or ranch, then it must be decided who will be responsible for managing the land. Will it be the heir who remains in farming, the operator who rents the land, a neighboring farmer, a family member, or a professional manager. This is an important decision that will affect not only the income generated by the land, but relations within the ownership family.
If the next generation owners decide to sell, the decisions made could greatly affect the sales price of the property. Do the new owners know enough about the farm or ranch to understand what it might be worth in the marketplace? Do they know the local land market and the buyers and sellers of land? Will the owners try to sell on their own or list with a brokerage? Once again, seeking good advice is important when it comes to selling land for the best price possible.
Communication is extremely important when developing succession plans for the land asset. The current owner will do well to communicate their plans to the next generation owners so that there is a greater understanding of what will happen upon transfer of ownership. The next generation of owners should foster good communications amongst themselves so that the appropriate decisions can be made concerning the operation or sale of the land. All the way through the succession, from planning by the current owner to the actions taken by the next generation of owners, having good legal and tax advice is critically important to achieving the desired outcomes.
Senior Vice President - Real Estate Operations
|Category: Farm Management News|