Estate Planning Challenges for Farm Families
Farm families have a unique bond to the land they own. In caring for it across generations, they learn to care for their property in a way that you wouldn’t care about stocks, retirement funds, or other assets. When it comes to estate planning, this presents numerous challenges that other families simply do not have to think about.
If you’re ready to start estate planning with a Louisville estate planning lawyer that understands the needs of farm families, let’s talk. Call John H. Ruby & Associates at 502-373-8044 to set up a consultation now.
Protecting the Future of Your Family Farm
Passing down a farm is not the same as passing down a family home, retirement account, or standard family business. You’ve cultivated your land and built sizable agricultural assets, and that’s part of your heritage. A farm is also considerably more work than most other assets.
If you have a non-agricultural family business, it doesn’t necessarily matter if your beneficiaries love the type of work you do; they can outsource much of it to managerial staff. The same is not true for a family farm. To ensure that your farm continues to provide for your family for generations, you must choose carefully how you pass it down, who gets rights to it, and whose goals align with your own.
Balancing Assets Among Beneficiaries
This can be a touchy topic for families. No one wants to treat their children unfairly or in a way that sows discord among them, but a fair split of a farm is complex. It’s rarely just each child getting the same percentage of ownership—it depends on who has demonstrated a passion for and knowledge of farming, as well as who has put in the time and physical labor to make it successful. Long-term, you want to treat beneficiaries equally, but you also want to ensure that the farm remains viable for generations to come.
Exploring the Financial Side of Your Farm
Maintaining a farm is far more than just physical labor, which is something many non-farming families do not understand. The financial side of a farm operation is incredibly complex, and you must have a complete understanding of your current financial status before making any solid estate plans.
It is crucial to understand the farm’s current market value, the amount of income it brings in on an annual basis, what factors may affect that income, what subsidies the farm is eligible to receive and when they expire, and what tax season looks like. This could have a significant impact on your estate planning—imagine finding out that your farm is dependent on a subsidy that’s set to expire in a few years, making it far less of an asset than you thought. In addition to working with an estate planning attorney, you will need to work closely with a financial advisor with an in-depth knowledge of farm operations.
Considering Liquidity Needs
One particularly unique aspect of farm ownership is the issue of liquidity. Farms are generally illiquid assets, which means it’s not easy to convert them into cash. You can sell off antiques and jewelry, cash out retirement accounts, and put homes on the market.
Even businesses are sometimes more liquid than farms—you may be able to sell partial ownership of it to come up with cash or sell it to an interested buyer. Farms aren’t that easy. Selling a farm requires finding the right fit since few people are equipped to take on the demands of farm life. Selling to a corporation is often the easiest option, but it’s also usually the least desirable option for farm families.
This raises an important question: how will other beneficiaries come up with cash to buy out an heir if one of them isn’t interested in keeping their share of the farm? You should work with your estate planning attorney to determine possible solutions.
Contact John H. Ruby & Associates
When it comes to estate planning, you want an attorney who understands your specific needs and goals. We can help. Set up a time to talk to the team at John H. Ruby & Associates to start protecting your legacy. Call us at 502-373-8044 or send us a message online to schedule your consultation now.