Farmers who have more than one child have an estate planning dilemma. The most valuable property they have is almost always the land and the farm equipment.
If all of the children are not interested in farming, it can be difficult to give them all an equitable inheritance.
Farmers with multiple children have two seemingly conflicting goals when they plan their estates. They normally want to preserve the family farm in one piece if possible and make sure that all of their children get a roughly equal inheritance.
These goals can be difficult to accomplish because the overwhelming largest portion of the estate is often tied up in farm assets, such as land and equipment.
This can be even more difficult when one child is currently participating in the farm operations and another child is expected to join later.
Recently, Delta Farm Press discussed one possible solution to the problem in “2 separate entities enhance farm succession plan.”
The idea is to split the farm into two separate corporate entities. One entity holds title to the land while the other entity owns the farm equipment and operates the farm. The second entity leases the land from the first entity.
Buy/sell agreements are put in place as a way to make sure that the entities remain in the family.
An estate plan then gives the children shares of these corporate entities instead of the physical property. A child who wants to continue farming would then have the option of purchasing the shares of a child who is not interested in being a farmer.
Many other solutions to keep a family farm in the family are also possible.
Estate planning attorneys can offer advice to provide the best solution for your family.
Reference: Delta Farm Press (March 6, 2016) “2 separate entities enhance farm succession plan.”