Ag News -
State Ag News
Friday, 21 December 2012 07:25
By Amy Bickel - The Hutchinson News -
The average age of the farmer is nearing 60, and with that, 70 percent of the farmland could transfer into new hands by the year 2025.
Several of those aging farmers toiling on Kansas farms, however, just like their ancestors before them, haven't planned for the future.
Hayes attorney Stacey Seibel, who has done estate planning for 16 years, said she asked the question at a recent seminar in Plainville of 35 farmers aged between 50 and 70.
"Out of the 35 farmers, 25 percent didn't have any plan or even a will," Seibel said, adding that another "25 percent had a will, but the will was more than eight years old."
Kansas Farm Bureau attorney Mike Irvin said he gets calls from members saying they don't know the plan their father has for the farm. He's also heard horror stories of a farm pulled apart because the father never planned for the future and the next generation wanting to farm.
Younger farmers are under the notion that "someday, son, this will all be yours."
"The problem," Irvin said, "is, I get guys who come up to me, 55 years old, and they say 'I don't know what the plan is.' "
It's a difficult subject to bring up when you are the younger generation wanting to take over, Irvin said. In addition, there is no cookie-cutter answer.
The aging farmer has to decide how to make a smooth transition, what's fair for the non-farming children, along with the tax issues and setting up something that will help with the couple's retirement.
Yet, without a plan, without communication between the children, the farm could disappear, along with the next-generation farmer, he said.
Communication is the key for a smooth succession, Irvin said.
"That's why it is important to plan," Irvin said. "Then, after the parent dies, there is a whole planning stage that will transfer this farm to the next generation. Then it is less apt to go to court, less apt for something to block the transfer."
Pratt County farmers Berry and Carla Bortz are working on transitioning the farm to their children, Darnell, 21, and Brandon, 26, who have expressed interest in returning to the farm. A daughter, Amber, 25, is working on a master's degree at the University of Kansas.
The couple started working on both estate and succession planning more than a year ago.
It's tough, Berry Bortz said.
"We haven't figured it all out yet," he said, but added that part of it is once his boys return, they will "earn their stripes, so to speak."
That could mean having their sons buy into the farm at 10 percent, let them work for seven or eight years, and then buy in another 15 percent, he said.
"By that time, I would be 65, and they would be equal partners with me and Carla," Bortz said. "We would all have 25 percent of the farm."
They would then make decisions from that point on management of the estate, he said, adding that he and his wife can't prepare for all contingencies.
"Some things have to be flexible," he said. "That is our personal opinion. That might not be the way to do it for everyone."
Farmers may also consider whether to start a partnership, a limited liability corporation or a general C corporation in an effort to bring in the next generation, he said.
"The devil is in the details," he said. "Those are the issues we are looking at."
Farm transition is a significant issue that will be increasingly important over the next decade, said Arlyn Miller, an attorney at Martindell Swearer Shaffer Ridenour law office in Hutchinson. Farmers today are disproportionately older and nearing retirement, and many will face transition issues in the near future.
With huge land values, it can be difficult for a young farmer to acquire the financing needed to buy out non-farm family members. Moreover, a life insurance policy might not be an affordable option, and on a smaller farm, dividing the assets equally among the children might not leave sufficient assets with the farming child to have a viable farm.
"It's a tough issue," Miller said. "Sometimes it is the most difficult professionally because it is the most difficult for the client. It's difficult to put together a plan that meets all the objectives. The parents often want one of the kids to be able to continue to farm, but they also want to treat all their children alike. Those two objectives are not always achievable."
But a lot can be done through proper planning and strategy, he said.
Planning is at the forefront of Bortz's mind. He said that farmers just starting the process need to realize it might not be a quick process.
"Don't think you can do it in one afternoon," he said. "It takes time and a lot of thought. Get with your advisers, your kids, and think about it. You have to figure out where you want to go and work with the end in mind."
On the Net: Beginning Farmers: www.beginningfarmers.org/farm-succession/
Kansas State: www.agmanager.info/farmmgt/planning/default.asp
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