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Giving the Family Farm to Grandchildren Instead of Children

Published November 16, 2017 by Brady Cobin Law Group, PLLC

There are often bumps along the way, when it’s time to plan for the future of a family farm. Farms are usually passed along to the next generation, but there are instances when parents want to give the farm to grandchildren.

A history of farming for five generations is a wonderful and increasingly rare thing. Continuing to keep the farm in the family, when children and parents have different ideas about how to do that can lead to some tough challenges.

According to Successful Farming’s recent article, “Passing the Farm to a Grandchild,” change can result in a lot of stress. A family meeting with all of the voices present will certainly generate a wide variety of opinions. One viewpoint could be to keep the farm together. But children who aren’t farming may have the tough emotions of knowing the intent for generations, and how this impacts their own inheritance and that of their children.

This issue can be remedied for the children, grandchildren and farming operation, if handled correctly.

A land-owning entity is one option, but a large acreage is significant collateral that could be used to expand the farming operation. When you put the land into the entity with family members having different goals, the assets would have limited collateral value for future purchases. As a result, the farm operation may be finished expanding at that point. There would need to be a clear operating agreement and rent formulas and options.

It’s likely that an individual will want to leave the farm operation. One way to address this is to allow them to sell. That means you need to have a pricing formula, and those who want to buy will need a plan, so they have cash.

A life insurance policy may help, if it’s tied to some type of buyout for machinery or the home farm.

If a farming grandson could take the home farm and the machinery in return for cash going to other family members, some additional land could then go to the grandson, subject to his mother’s life income. The balance of the land could subsequently be held in an entity with everyone having ownership with guidelines for rent and buyouts.

An estate attorney who has experience with the special challenges of farm ownership and multi-generation farming will be able to help work through the different options and figure out a solution that will be serve the future of the farm and of the family.

Reference: Successful Farming (October 6, 2017) “Passing the Farm to a Grandchild.”

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