We often think of the family farm as the homestead where the family was raised -- the house, buildings and surrounding fields. But in these modern times it might make sense to think of all the elements as separate assets on your family balance sheet.
You might think of the "home place" as several assets:
• The house and yard as a residence.
• The grain handling and storage facilities as an entity.
• The machine sheds, shop and equipment as an entity.
• The crop production acreage as another entity.
• And the livestock facilities as another entity.
If you consider separate entities in your operation, you might find that the transition to the next generation gets easier. One common idea is for Mom and Dad to retire from active participation in the farm, but retain ownership of the land and buildings, and charge the farming business annual rent that provides them with an income in retirement.
Maybe Mom and Dad sell the residence to one heir and move to town. They might sell the machinery, storage and maintenance facilities to another heir, or maybe an employee. They can use the proceeds from these sales to supplement income and pay for expenses in retirement.
It might be clear who should run the grain handling operation. That could be different from the responsibility for the crop production activities. The machinery maintenance might be best handled by a different family member.
By breaking the family farm into multiple entities, the transition process is often more manageable.
If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.