I first wrote about our farm succession planning initial steps in this July blog. In that blog, I discussed both having the initial uncomfortable conversations within our operation, and also finding the right team of people to help on the journey.
The uncomfortable conversations started a few years ago, and continued in our shop this morning. Our accountants visited for five hours of brainstorming and to discuss our next steps. In the midst of confusion, our accountant said something that stuck: "We have to prioritize the issues."
What are these issues we need to prioritize? Today, my parents own 10% of the cropland acres we farm. They rent 75% and I rent 155 of the rest of the cropland farmed. I operate my 15% separately and pay them for equipment. This arrangement has helped me gain experience in marketing, obtaining financing, working with landowners, and buying inputs. My parents own all equipment and cattle.
Here are some initial priorities we are now going to focus on.
We need to separate the owned land from the operating business into different entities. The operating company will lease the acres from the land company in the same way it does with other landowners.
In 2016, I will contribute to start buying shares of the operating company. We feel this is the best way to protect my parents from huge tax burdens.
A long-term lease agreement will be made between the operating and land companies that will protect the operating company from losing the ability to farm the family land. These legal documents will contain language that will hopefully avoid problems in the future.
My parents want to provide me the opportunity to farm, secure their retirement, and also protect the land that my sisters and I will inherit.
Let's face it: I would rather have been spreading manure than talking about what would happen to the operating business upon my death. Farm succession planning is not for the faint of heart and I can see why farmers put this off until death. I thought 14 hours of shelling corn was tiring, but that pales in comparison to the mental fatigue created by a few hours of transition talks.
The opinions of Maria Cox are not necessarily those of Farm Futures or the Penton Farm Progress Group.