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Succession Planning for Family-Owned Farms: More Planning, Less Fighting Later

Recently, I had the opportunity to contribute to the Farm Journal Legacy Project concerning family farm succession planning, a topic that is central to our firm.  I am always delighted to have the opportunity to discuss this matter, as succession planning offers the opportunity to save hurt feelings, loss of the farm, and substantial money in taxes.  The legacy of a family farm should be that of passing the farm to the next generation, not legal problems. Fairness and Determining Who Should Inherit Assets  Succession planning offers the opportunity to have open and frank conversations about the desires of the next generation.  Which children (if any) will want to work the farm?  How can parents be fair in leaving a legacy to those children who don’t want to farm if their estate is comprised almost entirely of farm assets? There are numerous ways that trusts and other legal agreements can be structured in order to provide fairness and a clear path of succession that will minimize hurt feelings and potential litigation.  At the outset, it’s important to have conversations with all involved in order to understand each person’s interests so that a cohesive and fair plan can be developed. Once the structure has been developed, the legal arrangements, including trusts and buy-sell agreements, can then be created.  Because every family’s situation will be unique, their legal matters will also be unique.  Ideally, when the time comes for the farm to pass to the next generation, the succession will be smooth, taxes will be minimized, and the farm will be protected. Non-Family Successors and Purchase Rights  In some cases, succession...