Farm Succession Planning – What Are the Assets of the Farm?
The first phase of a good farm succession plan is determining where the farm is now. One of the questions to be addressed in this phase is: What makes up the assets of the farm? If you don’t have a clear understanding of what is owned and how, it will be difficult to transfer. It may also result in some unfortunate and unintended consequences.
In analyzing the assets of your farm, here are some questions to consider:
Does the farm own any bank accounts?
If so with what banks?
What is the balance of each account?
Does the farm own and/or lease land?
If so, itemize in detail.
Does the farm own and/or lease water stock or water rights?
If so, itemize in detail.
Does the farm own and/or lease any buildings or other improvements?
If so, itemize in detail.
Does the farm own and/or lease equipment?
If so, itemize in detail.
Does the farm own and/or lease vehicles?
If so, itemize in detail.
Does the farm own and/or lease livestock?
If so, itemize in detail and identify any breeding livestock.
Does the farm own any crops held for sale or feed?
Does the farm own any inventory or supplies?
Does the farm own any life insurance?
Does the farm own any notes or contracts?
Are there any other assets owned and/or leased by the farm?
For any owned asset:
Who is the owner?
Is ownership shared with any other person or entity?
What is the value?
Is there any debt encumbering the asset?
For any leased assets:
Who is the owner of the asset?
is the lease written or oral?
How long is remaining on the term of the lease?
What is the rental rate?
Will the lease transfer?
Are there any other debts or liabilities of the farm?
In order to determine what needs to be done to transition the farm to the next generation, it is necessary to have a clear picture of what constitutes “the farm.” This will allow for the proper transfer vehicles to be used and it will allow for a proper analysis of the tax consequences. It will also allow both generations a clear picture of what needs to be understood and addressed for a successful transition. As the writer, Wendall Berry is purported to have said: “If you don’t know where you are, you don’t know who you are.”
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.