Some farmers have family successors. If you don’t, you still need to plan for the day your farm exchanges hands. Here are a few things to think about as you start that process.
Without family members to take over, farm succession planning is hugely important. It helps you make sure your financial needs are covered later in life. In other words, it keeps your financial goals well within reach as you age.
“Farmers must decide what to do with property in ways that reflect their personal values and financial goals,” according to Nationwide Advanced Consulting Group Technical Director Steve Hamilton, JD. “That’s true even if they lack natural successors.”
Start with key documents
There are three main documents to direct how farm assets will be managed late in life or upon death:
- Durable power of attorney
- Medical advance directive
These forms are essential when there are no farm family successors. Without a will, for example, state law determines how property is distributed. That happens without consideration of the owner’s wishes.
A living will is the most common medical advanced directive. This type of document directs your medical care if you can’t do so yourself. “A living will should completely describe health care preferences. You may opt to refuse treatment in some cases, for example. A living will documents those preferences,” Hamilton said.
Work with a trusted advisor
A durable power of attorney form delegates certain financial and/or legal decision-making authority to another individual even if death is not imminent. No matter what combination of these documents you create, work with a trusted advisor to make sure you’re covering all your bases.
“Ideally, it makes good sense to combine the living will and medical power of attorney-type documents,” Hamilton said. “It is best to have the document or documents drafted by an attorney familiar with the subject.”
Find the right transition strategy
Just like completing planning documents, work with a trusted legal advisor to identify the right transition strategy for you. Options include:
- Operate the farm on a scaled-back or part-time basis
- Lease land and other major assets like livestock and machinery
- Hire a custom farm or ranch operator
- Transition to a young/beginning farmer
- Planned giving or land conservation
- Agricultural conservation easements
- Combined conservation easement/charitable gift annuity
Always think long-term
Think about both your expected financial needs late into life as well as any personal preferences for how you want your assets handled in arriving on the right strategy.
“Rather than focusing on transferring assets or protecting beneficiaries after the owner’s death, the childless should try to focus more on lifetime concerns and especially their fear of running out of money," Hamilton said. "In doing so, they should look to their professional advisors to help guard and protect their long-term interests."