The Other Large Transfer of Wealth: America’s Agricultural Land

The Other Large Transfer of Wealth: America’s Agricultural Land

As the next generation of farmers and ranchers dive into their productive agricultural careers, consideration must be also paid to retiring and aging producers.

A lot is being written about the transfer of wealth, as Baby Boomer’s retirement accounts begin to be passed on to their children. However, another big generational transfer has begun. The U.S. Department of Agriculture says that nearly 10% of the nation’s nearly 100 million acres of agricultural land will change hands in the next few years, as a new generation of farmers and ranchers takes over these properties from their parents.

As reported by Agweek in the article “Ranching and retirement: Succession planning becomes vital,” the average age of U.S. farmers and ranchers is 58.3 years old. Just three decades ago, the average age was 50.5 years old. Agriculture is in a transition phase and families need to focus on succession planning.

Farmers and ranchers, referred to as “producers,” often say that they’ll stop farming, when there’s a funeral date on the calendar. That attitude may be changing, as second, third, and even fourth generation farms are evolving. There are new leaders for the next generation, who have new ideas about how farms can be run. Many older producers are getting ready to pass the reins along and retire.

The focus on succession planning used to leave the older producers and their retirement plan as an add-on, something that got addressed, when the division of the farm and assets was completed. In many cases, it got left out altogether. However, questions about how they will live in retirement are now coming to the forefront.

Producers who begin planning on succession, understand that their plan must include their retirement and how they’ll support themselves in what could be a two or three decade-long retirement. How can the family continue to operate the farm, grow it to support the generations, but also provide the oldest members of the family with a comfortable retirement?

Cash flow for retirement is the first focus. The families need to determine how they can generate passive income. Some families put the operation into an LLC or general partnership, so that business assets and income flows through that entity. This also creates a smoother path to ownership for the next generation. The land can’t be rented to the farmer directly, but it can be rented to the LLC, which generates cash flow. It is passive income, so it won’t make the farmer ineligible for Social Security and is not subject to the self-employment tax.

Families need to determine the true value of the farm and if it can produce income for another family, while supporting the older generation. This takes planning, and considerable discussion. The family must also work through what their strategy and vision is for the land and the families.

Every family is different, and farm and ranch families face many different challenges. Once the family has a clear vision of the future, they should all meet with an estate planning attorney, who works with farm and ranch families. They can guide them through this process and ensure that their plan aligns with the future for all generations.

Reference: Agweek (Dec. 3, 208) “Ranching and retirement: Succession planning becomes vital”

Hear From Our Clients

“On the threshold of retirement, we finally decided to quit thinking we could self-prepare the requisite documents. We had previously had only a very simple will. We needed the necessary legal (including updated will) & health care docs but didn’t want to deal with the time & complication of legalese. Cindy made the process relatively painless. She took the time to explain and answer questions without trying to upsell services. We were done in 2 meetings plus the reading of emailed drafts. In addition to preparing the documents, Nelson Eldercare will be there when our adult children need advice on executing the plans we’ve put in place.So glad it’s behind us and would recommend Cindy and her helpful staff.”

- Bonnie

Cindy and her company treat their clients like family. Nelson’s offers clear, direct, and honest guidance in planning for your families security and future. No one wants to actively sit down and make these decisions, but Nelson’s makes this process seamless. I was so impressed with their willingness to answer all questions big or small. So glad I made the decision have them help my mom and dad and now me. You can’t go wrong with Nelson’s Elder Care Law.

- Hope

The very best elder law attorney and staff anyone could ever ask for! I have referred a number of clients to Cindy and she never disappoints. She is kind, caring, and extremely thorough in making sure everything is completed as it should be. I highly recommend Cindy for anyone needing lawyer services; she truly goes above and beyond for every client she helps and has had a huge impact in so many peoples’ lives. Thank you, Cindy and staff, for everything that you do- I’m so glad to know you!

- Kerri

I heard Cindy’s presentation at a Senior Luncheon at my church, and was very impressed. She helped my daughter and me understand many aspects of elder law. Josh has also been very helpful in my planning to enter an independent living situation . I have told many friends about them.

- Charlotte

Cindy and the Nelson Elder Care Law team are trustworthy and helpful. They are the experts in elder care law. At Leaf Cremation, we entrust our families to the care of the Nelson team when their services are needed.

- Pierce