Farm Law and Ag Law Blog

     Part II-Reasons Plans Do Not Get Established.   (Authors’ Note :   This will be a several part series discussing why the current method of farm estate and succession planning is not working)  Last month we discussed the fact that statistics show that in the past 10 years, there really has not been much in the form of improvement as to estate and succession plans being created by farmers.      Overall, 75% of farms in the country do not have a succession plan, and that number is roughly the same from ten years ago.   Probably a good follow up analysis, which I have never seen anyone perform, is of the 25% of farms that do have a succession plan, what percentage of those are successful? Continuing our march towards identifying what is wrong with farm succession planning and how to fix it, we need to first look at the upcoming “farmestateaggeddon” that will happen this decade.   According to USDA data, a whopping one-third of America’s 3.4 million farmers are over the ag

                                Part I-Reasons Plans Do Not Get Established.  (Authors’ Note :   This will be a several part series discussing why the current method of farm estate and succession planning is not working.   In this first part, we will discuss the current state of farm succession and estate planning and compare to where it was ten years ago)         After several years of the farm economy in the doldrums, that past 2 years have seen a reassurance leading to record land and machinery prices, as well as just about everything else. Prior to this, many farms were not even sure they would survive long enough to need a succession plan.   Now, we’ve returned to where we were around 2009, 2010, and 2011, when the size of farm estates grew greatly and made it very difficult, if not impossible, for farming heirs to buy out non farming heirs due to the large capital outlay.   With land and machinery at all times highs, the difficulty is even now more profound.              The

                                    It has begun.   Nervous clients, including farmers and others, have started calling with growing concern   about what can only be described as nightmarish changes to federal tax laws.   Changes being discussed are a extreme reduction of the current federal estate/gift tax exemption, elimination of step up in basis, elimination of Section 1031 like-kind-exchanges, as well as other drastic changes being proposed by the new administration.   Before delving into the subject matter in more detail, people should remember the immortal words of Yogi Berra when he said, “it’s like déjà vu all over again”, and look back on December 31, 2012.   When the clock was to strike midnight, we were not going to see Cinderella’s carriage turn back into a pumpkin, but the federal gift and estate tax exemption was to plummet   from $5.12 million per person all the way to $1 million   per person.   Prior to that, taxpayers had enjoyed the ability to pass up to $5.12 mill

In last month’s article we discussed whether or not the next generation can afford to take over the farming operation.   I received a lot of feedback on the article and one response stuck with me.   The question was posed, if the farm is not making ends meet now, how can it then be profitable to the next generation, especially being profitable enough for to bring in the next generation?              It was a very good question and had me thinking on a response for quite some time.   I will first lay out a disclaimer (we attorneys are good at doing such) and say that I am not a farm economist.   Nor am I versed in financial advising.   In addition, not every farm is going to be helped by what I write in this article, nor is what I write about a good fit for everyone.   I am merely going of off 14 years of law experience and having worked with hundreds and hundreds of farmers running just about every type of farm operation there is.   Here goes: 1.        Farm Structure:   The

Will your farm be in the 97% club or the 3% club? One of the overriding goals that farmers have is that their farm operation continues on to a successor.  Then why is it so difficult to get farmers to put a succession plan in place?    A recent statistic stated that only 33% of all farms in this country will pass to the next generation.  That number does not seem shocking.  Of the farmers that are over 60 years old, representing the “current generation”, it is entirely plausible that only 1/3 of the farms transfer to the “next generation” (i.e. people aged 30-60) over the next 15-20 years when the current generation retires.                The same statistic source went on to say that of the 33% of farms that transfer to the “next generation” only 10% of those will pass to a third generation.   Whoa.   Let’s take a second and do some math.   We have roughly 2 million farms in this country.   If only 1/3 transfer to the “next generation”, then that means we drop to 660,