Farm Insurance Agents Understand Your Desire to Pass Down The Farm
Most farmers dream of the day when they can sit on the front porch and watch their son or daughter working the farm. After all that’s how it was for them wasn’t it? They took over the place from their father or uncle just like they had taken it over from those who came before them.
If that’s going to happen you really need to begin discussing the possibilities right now, today, with your offspring – all of them, those on the farm and those who’ve left.
You should start today talking it over with your spouse too. It’s true you know that wives outlive husbands on the farm by an average of ten years – so if you two don’t do the planning for what you agree is the best solution for your family, you widow will do it without you and maybe under conditions you swore would never happen.
If your kids are not going to farm, which is the traditional retirement plan for generations of farmers, you’re going to have to do something to get the maximum value out of all your hard work, so you and your spouse can live financially secure lives – with enough money to go visit those grand children.
And when you’re gone you’ll want to have enough so that each of your children can have a legacy of some sort. In cash.
Since you, if you are like most farmers, have 70-80% of everything you own tied up directly or indirectly in the farm and most of that is invested in land, buildings, livestock etc. – everything but cash, you are going to have to have a plan that converts the non-cash assets into cash.
The smart way, the most cost effective way, is to begin now while you are in your best bargaining position – to seek out potentially interested buyers and negotiate an agreement that will give your family the best possible return on your decades of hard work.
Farm insurance agents know all about this process. Often they know potential buyers you don’t know and sometimes they can be a sort of go-between to get the discussions started. Not in a formal way so much as in how they seem to know everything about everything that’s going on in the community.
And if there was any group of people who are universally known as being helpful and concerned about their neighbors its farm insurance agents.
As the discussions move forward from the informal to the concrete, the best way to nail down the terms and conditions of sale is through a written document, a contract which clearly establishes who is going to do what, when, and how they are going to do it.
The lawyers and farm insurance agents call this a buy-sell agreement.
Buy-sell agreements formalize the procedure for turning your farm over to new owners. It provides a seamless transition of ownership and management with little if any decrease in the value of the farm.
If you are in business with one or more other people I hope you already have a buy-sell agreement and will use this information as motivation to meet with your lawyer and your farm insurance agent to make sure it is up to date in from a valuation, terms, and conditions point of view.
And if you are a sole owner, maybe someone who originally thought they’d have a son or daughter following them by now – but for whom that has not turned out to be the case – a buy-sell agreement is the ideal tool with which to begin now to plan for a different owner of your farm in the next generation.
Maybe it’s the kid down the road whose parent’s farm is not big enough to absorb his brothers and sisters AND him. Farm insurance agents know people all over the area – maybe they know of a situation like that and can be instrumental in getting you together with this stranger who will become the next generation on your farm.
Here are a couple of ways buy-sell agreements can work. Farm insurance agents have briefcases full of examples like this and many others. Plus their insurance companies are overrun with tax and estate planning specialists who love helping their agents help people like you.
One is called the cross purchase method. Here the agreement is directly between the potential buyers and sellers. Each agrees that if he dies, retires, becomes disable, or otherwise leaves the farm – he or she will sell their interest to the others at a set price. It’s a simple arrangement to continue the farm and get your money out at the same time.
Another is the entity purchase method. In this situation the agreement requires the farm itself to buy the departing owners interest. The farm is continued by those who remain.
Needless to say your unique circumstances will dictate the best kind of buy-sell agreement for you and your family.
In either case your family and you are assured of the best price for your farm – because you did the negotiating of price, terms, conditions, etc. now, when you are in the strongest position you are likely ever to be in.
