According to reports, more than half of adults have no estate plan, and experts are saying that planning and succession issues are especially neglected by many involved in farming. Estate administration is a serious discussion any adult in Oklahoma needs to have, but reports are that families with agricultural businesses are facing increasing obstacles to succession. Those hurdles include cultural outlooks, financial matters and family matters.
According to reports, the average net worth of farm households in the U.S. was a bit over $1 million in 2011. However, around 76 percent of that worth is tied up in assets, and many farmers are unwilling to sell non-liquid items. Many farmers also attempt to maintain control of their operation until late in life, reducing productivity and possibly impacting the business negatively.
Experts state that many farmers never actually retire, which makes passing the estate on to heirs after death an important process. One complication in agricultural estates is that there are often one or more children who are not interested in maintaining a farm operation. Farmers want to be fair to all heirs, but it is difficult to divide farm assets equally when not everyone wants to be a part of the business. Leaving farm assets to some heirs will result in those assets being sold.
Without a will -- and even sometimes with a will -- assets may be divided among all heirs, which can be unfair to one heir who previously worked the farm. Farmers who want to keep their legacy intact may want to consider options for estate administration outside of a simple will. One option is to create a limited liability company, or LLC, to govern the farm. The heir who is most likely to keep the farm running could be made chief executive officer in the company. Other heirs could be designated as profit participants so that they can benefit without having to be involved in farm operations.
Passing on the legacy of any company requires careful planning and creative use of legal tools. Farmers and other business owners should plan for succession early to avoid problems with estates later in life or after death.
Source: Inforum, "Plan for retirement: Farm succession discussion crucial" Tracy Frank, Feb. 13, 2014