“Start early and communicate often with your family about how you are thinking about transferring the farm business and land,” Teresa Opheim said, who works on farm transition issues for Practical Farmers of Iowa and Renewing the Countryside.
Opheim, along with Jim and LeeAnn Van Der Pol of Kerkhoven, Minnesota, spoke about farm transition and the future of family farms at the MOSES Organic Farming Conference held earlier this year in LaCrosse, Wisconsin.
“Not having a [transition] plan is not a good option,” Jim Van Der Pol said. Things didn’t all go smoothly when the farm operations transferred from Jim’s parents to their generation. They are working hard with their son and his wife, Josh and Cindy, and three of their grandchildren to keep the family farm going strong.
“I think the farm itself should have a say,” Jim said. They recalled how things changed in farming in the 1980s. The farms around them are no longer farmed by the people who live on them. He wants their family farm to still have plenty of people living there, farming the land decades into the future.
Opheim and the Van Der Pols encouraged good communication and taking the time to think through what matters most for the future of your family and your farm. “Many people jump into financial and legal strategies without clarity on their vision and goals for the farm,” Opheim said.
Having informal agreements and casually transferring assets over is generally not a good idea. The Van Der Pols said their accountant advised them that type of thing could be a red flag to the IRS.
Their family markets their own meat, and they have a LLP for the farm and an S-corporation for the meat company, each with their own accounting. That way they can track which entity is making how much money. They are also using the LLP to slowly transfer ownership to Josh and Cindy.
Jim said they are using the LLP to edge themselves out of the farming operation. Their plan is to keep passing over shares until they have a minor share or are out. They are still working on the timeline for doing this.
Jim and LeeAnn have other children who are not involved with the day-to-day farm operation, so they spent a good deal of time thinking about what was fair versus equitable for an inheritance.
Is it fair to the farming heir to divide the estate financially equally between farming and non-farming heirs? Has the farming heir contributed to the growth and stability of the farm, and should he or she be rewarded for that?
Jim and LeeAnn decided their farm land should be divided equally between their children, but they are working to set up a gifting plan so Josh gets his share in the next few years. That way Josh and Cindy can use their land as an asset when getting loans.
Jim Van Der Pol advised others to avoid the scenario where the 70-year-old son is doing all the farming, but he's still the “boy” because the 90-year-old owns everything and makes all the decisions.
Practical Farmers of Iowa (PFI) offered four tips for communicating with family about your farm legacy:
- Start as early as possible and keep it up through the years. Circumstances will change and so may the decisions you make on the journey to farm transfer. Communicate significant decisions repeatedly.
- Start by listening, fully listening, to the other generation without thinking about how you will respond.
- Find what type of communication works best for your family. Face-to-face family meetings work well for many, while others benefit from written communication such as emails and letters because they can refer back to them to remember conversations.
- Get outside help, an independent facilitator or mediator to help with family meetings. Always use legal counsel.
“Find a lawyer who is familiar with this type of work; don’t try it on your own,” Opheim said.
There are federal tax guidelines dealing with inheritance and gifting, and states often have their own set of rules. Make sure the person you hire is familiar with this important information.
The Van Der Pols said in addition to talking to an attorney, it’s also a good idea to talk with other families who have been through this to see what worked and what didn’t work for them.
For online resources, check out the Farm Transitions website or contact your local extension office.
Kelli Boylen is a freelance writer from Waterville, Iowa.
PHOTO: The Van Der Pol family members who operate Pastures A Plenty are (left to right) Jim, LeeAnn, Joshua, Kirsten, Cynthia, Jake and Andrew. Photo provided by Jim and LeeAnn Van Der Pol.