Faculty expert Jennifer Friedel, Assistant Professor of Practice and Director of the VA Land Use-Value Assessment Program, weighs in on estate planning and succession planning for the family farm.
In an era where family farms are disappearing at alarming rates, farm succession planning is a hot topic of conversation. Farmers need to note that in addition to estate planning, if they desire for their farm to continue in operation beyond their day of reckoning, a thoroughly thought out succession plan is also needed.
While an estate plan and succession plan must work hand-in-hand, they are two separate beasts, both of which are required for a successful transition of the family farming operation.
An estate plan will set forth what assets are bequeathed to which of your heirs, while a succession plan will guide the farming operation into the next generation. If the plans are not compatible and do not complement each other, both the distribution of your personal estate and the operation of the family farm beyond your years are at significant risk.
It is important to note during the estate planning process that in order to protect the future of the family operation, equitable doesn’t always mean equal. Should you leave the entirety of your farmland to each of your children equally? Maybe, but also maybe not. Should you leave your home and personal property to your children equally? Maybe, but also maybe not. It is often said that farmers are asset-rich and cash-poor.
A successful estate plan and succession plan should consider how divvying up the assets will most effectively meet your goals and provide for an equitable distribution of your estate. There are many, many tools to consider to provide for your heirs, while protecting the family farm from being split up into impracticable working pieces. Often heirs wishing to continue operating the farm can’t afford to buy out the other heirs, a scenario too commonly seen.
The toolbox is well stocked, but to benefit, you must engage in the planning process. One of the greatest gifts you can leave your heirs are well thought out estate and succession plans. A failure to plan holds the door open for the proverbial chopping up of the family farm and the very likelihood of family discord after you’re gone.
Jen Friedel's professional webpage