This week’s poll asks, “Do you have a formal estate plan?”
Last week, the South Dakota Department of Agriculture (SDDA) and South Dakota State University hosted the first ever Beginner Farmer and Rancher Symposium. It was standing room only as the event focused on helping farm and ranch families transition their operations from one generation to the next. Clearly, this is an issue that impacts a lot of multi-generation operations, and this event aimed to help families navigate through some of the obstacles of transitioning an estate.
“The average age of a South Dakota farmer is over 57 years and climbing,” says South Dakota Secretary of Agriculture Walt Bones. “With continually rising input, land and machinery costs, it isn’t hard to figure out why this is. Creative solutions and dedicated resources are needed to help our next generation of agricultural producers and community leaders get started in this industry.”
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The featured speaker at the event was Ron Hanson, Neal Harlan University of Nebraska-Lincoln professor of agribusiness. Hanson talked about resolving family issues involved with the farm business ownership succession and the transfer of management control among generations.
Hanson talked about the curse of family wealth. He says, “Greed has now become a factor in settling farm family estates. Every family member is worried about what part is mine and how much I will get. The issue is that one generation ago, what was fair then is no longer fair today. Thirty years ago, the farming son inherited the family farm and the two non-farming daughters each inherited insurance and family cash savings. Today it is worth a lot more and 500 acres is now worth $5,000,000. We must find a way today that all children share in the ownership of the family farm business, one reason why trusts and LLC’s are becoming more popular.”
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Deciding whether to sell the farm at a fair price or keep it in the family at all costs is a conversation ranchers need to have as a family. If passing it on to the next generation, sweat equity is incredibly important.
“From the very start of bringing a son or daughter into the farm business operation, the parents must find a way to help them acquire farm assets,” he says. “The whole point is to have a succession plan in place. It is easier to pretend none of this will happen in your family, but avoiding this now will only spell disaster later. Parents must have a clear vision for the future of their family farm business and then be willing to discuss their ideas and plans especially with the children who returned back home. A goal without a deadline to be accomplished is nothing more than a dream.”
With Hanson’s words in mind, do you have an estate plan that will be adequate enough to protect your assets?
Unless Congress acts before Jan. 1, the federal estate tax will drop from an individual exemption of $5 million and a 35% tax rate to a $1-million/individual exemption and a 55% tax rate. This week's online poll question is: "Does your operation have a formal plan designed to minimize estate taxes?"
With 66 votes so far, 53% say yes; 45% say no, and 3% aren’t sure.
Vote in the poll here.
What steps did you take to ensure your estate plan is up to snuff? If you haven’t drafted an estate plan yet, what’s holding you back?