Rising commodity prices and the boost in demand for grains and soybeans have been a boon for farmers in recent years. They’ve also sent land prices soaring. Farmers in the Midwest find the average price for farmland is around $2,400 per acre, and sometimes the highest producing land goes as high as $9,000 per acre.
Prices like these impact not only short-term purchases and tax values, but also the longer-term succession strategy of the family farm. A little extra planning can yield a better result and help ensure your heirs are not overburdened with steep estate taxes, income taxes, gift taxes, etc. that can take a toll on your business assets and leave your heirs strapped for cash.
The most important step in the succession of your business is to start now. Developing a strategy does not mean giving up control – it means you’re taking control of your future. Working with a team that may include your accountant, attorney, banker, financial advisor and your Farm Bureau agent, you can assess your business today and define your goals for your exit strategy. You can begin thinking through these items using the business transition assessment questionnaire.
Once you’ve established broad goals for yourself and your business, your succession strategy team will help you understand your options. “The transition of the family farm is often a sensitive topic. Each operation has its own dynamic and requires a unique succession strategy,” says Jim McCarthy Advanced Markets Vice President at Farm Bureau Financial Services. “Sorting through these issues is a major step toward avoiding the personal conflicts and family feuds that can arise during the settlement of a farm estate. We helped clients Miles and Joyce work hard to keep everyone involved during their transition of land that has been in the family since 1878.”
The most successful family business transition strategies create advantages for everyone. Parents are reassured the business will remain in the family and goodwill among the children will also be preserved. Active business heirs are provided enhanced opportunities to explore funding options for a buyout of non-active heirs. And non-business heirs know that their inheritance is not dependent on the business heir’s work with the business.
“Once you establish your family farm transition strategy, don’t forget to revisit it and make updates as needed,” says McCarthy. “Rising land prices have rendered many old strategies ineffective. An annual discussion with your business transition team can help you rest easy knowing your strategy is in order.” For more information, visit www.small-business-transition.com.