Succession planning for farmers and ranchers is important, but it’s also complicated. Land, equipment, equity, your own retirement — how do you even begin to think about handing your business over to the next generation? This comprehensive guide covers everything you need to know about succession planning for your family farm or ranch.
We know the risks our clients in agriculture assume. Weather, commodity pricing, the impact of government policies, as well as the impact of income and capital gains taxes have a huge impact on their livelihood. We also know that farming, ranching, and growing timber is much more than a livelihood — it is a way of life. For many of our clients, land represents a legacy that has been carefully assembled and nurtured over several generations. We know that preserving agriculture as a viable lifestyle option for younger generations is something that is important to our clients.
As you map out your succession plan goals, also consider what’s important to you. If your home has significant meaning to you and your family, you may want to keep it in the family. Likewise, there may be certain charities you’d like to donate assets to, or you might have stipulations on the how the land you’re passing on should be used. Ultimately, you must determine what you want for your legacy.
This will be your north star when you put your farm succession plan into motion.Every farm or ranch is different, and the transition to the next generation comes with different concerns. Much of this variation is based on the assets you have within your possession. Here’s what to consider as you review your current assets:
Machinery can be dealt with in many ways. It can be sold outright or in installments, or ownership can be transferred when machinery is traded. Each option has tax implications, so you’ll want to consult with your tax advisor.
Gifting machinery may help limit some income tax consequences, but could also result in a gift tax. Finally, machinery can be leased to your successor, but you will have to determine beforehand who will pay for repairs.
The good news is this: By taking a look at your assets long before you’re ready to transfer ownership of your farm or ranch, you’re giving yourself time to choose the best path for you and your family.