Whether you make your living working on a farm that you have recently purchased or you are fortunate to have inherited one that has been in your family for generations you are likely to be concerned about what will happen to the land you love when you die. Federal estate taxation and other legislation has created a climate in which farm owners often have concerns about whether or not their heirs could be forced to sell off a significant portion of the land in order to meet potential tax burdens. In addition, farming is a difficult, time-intensive occupation that not all family members are eager to take up. If you are a farmer who is beginning to have real concerns about the future of the land you love, there are some things you can do now to protect your farm and make sure it can continue producing for generations to come.
Learn the facts and how they apply to your farming operation
Much has been written, both positive and negative, about the estate tax laws that have recently changed. As a farmer beginning to think about succession planning for your family farm, take time to learn the facts and how each one will apply to your operation. If your farm is a relatively small operation, with all land, improvements and assets valued at less than five million dollars, your heirs will likely not be affected negatively by the estate tax. A professional farm appraisal, as well as current land values and taxation valuations can help you determine the actual value of your farm, but be aware that these numbers can fluctuate from year to year.
Document important information and keep it updated
Another part of preparing your farm to be handed down to your heirs is to take time now to go over important documentation relating to your operation and make any needed changes, updates or corrections. This documentation should include updating or verifying the following:
- a land survey – if your land has not been recently surveyed or you are aware of encroachments or issues with adjoining land owners, it is important that you order a new survey to be performed and ask the survey team to mark all corners and verify boundaries so that you can deal with any issues that could affect your heirs when they inherit your land
- an inventory - of all equipment, vehicles and tools that are considered assets to the farm, remember to include current values and titles or ownership information for each and to update the list annually to document any changes that are made throughout the previous year
- an inventory of livestock – including records pertaining to the appraisal, purchase or sale of the animals, breeding records and health information, including vaccinations, registrations, etc.
- an inventory of crops - including yield and care information
- taxation and banking records - including personal property taxes on equipment and vehicles, property taxes, income taxes, bank statements and documentation for current loans and historical information on any loans that have been paid off
- records for all improvements on the farm – including updated appraisals, diagrams and other documentation on homes, barns, fences, corral systems, wells and other structural improvements
- insurance records – including personal insurance policies, as well as those that pertain to the farming business and infrastructure
- will and trust information – including any special instructions or legal documentation you wish to have in place for the farm upon your passing
Make sure that copies of any legal property information, such as a new survey and your will or trust are properly filed and recorded with your county. In addition, make sure that your attorney or the person you have chosen to handle your estate is provided with access to these documents.
Your wishes to pass ownership of your farm to your chosen heirs should also be discussed with your immediate family now, well before your passing. This will give your family time to voice any concerns and offer suggestions. More importantly, it will also serve to help avoid any confusion and make the transition easier on both you and your heirs. Contact a company like Community Sciences Corporation to have a land survey done.