This summer, Sacramento State’s College of Continuing Education will present Farm-to-Fork. This new Summer Academies series gives high school students exposure to farming careers while learning where our region’s food comes from, as well as how to encourage healthy communities. Sacramento community farmers, don’t forget your farm plan – an invaluable tool in your estate planning arsenal.
How the Farm-to-Fork initiative works
Nicole Rogers is the head of the Farm-to-Fork initiative for the Sacramento Convention and Visitors Bureau. She will be teaching this summer course with hopes of telling the “raw, real story behind the industry,” while celebrating farm managers, farm workers, veterinarians, distributors, marketers, and many others who play a part.
What the summer course involves
Students in the summer program will visit local farms and retailers to taste some of the local summer produce. They will also meet Scott Ostrander, executive chef from the Inn at Park Winters. The goal is to introduce them to cooking, nutrition, and other relevant issues impacting the region, like food waste and food safety. Ultimately, the students will be able to create a dish of their own, using the knowledge and skills they acquire from the program.
Why members of the farming industry need a farm plan
An estate plan is a structure for disposing of your assets at the time of your death. However, having a proper estate plan can serve a bigger purpose for farmers. At the time of your death, it is important to have a plan in place for a smooth transition of the ownership and management of your farm. Planning ahead provides security for your entire family, not just those who are actively involved in the operation of the farm. The goals of farm planning can be complicated but they are very important to the survival of your business.
Why is a farm estate plan necessary?
According to some predictions, one-fourth of the nation’s agricultural lands will likely change hands over the next decade. As a result, these valuable lands will be vulnerable to conversion to other uses. Estate planning is important for ensuring that productive farms and ranches remain available for our nation’s agricultural needs. Farm estate planning is also a wise choice for families who desire to keep their families in the farming industry.
The principal goals of a farm plan
A good estate plan for farms should accomplish essentially four goals. A farm plan should provide for the transfer of ownership and management of the farm, land and other assets to a new manager/operator. The plan should help to avoid unnecessary transfer taxes, such as income, gift and estate tax. A good farm plan can ensure financial security and peace of mind for future generations; while cultivating the management capabilities for the next generation.
Helpful transfer and tax reduction strategies
There are several different ways to plan for the transfer farm management and farm assets while reducing taxes whenever possible. Annual gifts can be used to transfer the business, while reducing transfer taxes by taking advantage of the annual gift tax exclusion. Also, gradually transferring management responsibility for the farm, along with asset ownership, can help make the transition much smoother from one generation to the next.
Consider using buy/sell agreements
A buy/sell agreement, also referred to as a buyout agreement, protects farm owners in the event a co-owner leaves the business. If a co-owner wants out of the business, wants to retire, wants to sell his or her shares to someone else, gets divorced, or passes away, the buy/sell agreement will protect everyone’s interests by establishing the price and terms for a buyout ahead of time.
Agricultural Conservation Easements
Another possible aspect of farm planning to consider is an Agricultural Conservation Easement. An easement can provide permanent protection for farmland in order to preclude non-farm development. It can also substantially reduce transfer taxes in cases where the market value of the land is more than its restricted value. An Agricultural Conservation Easement is basically a legally recorded deed restriction that prohibits activities which would damage or interfere with the agricultural use of the land. Since the easement is a restriction on the deed of the property, the easement remains effective even if the land changes ownership.
If you have questions regarding farm planning, or any other small business planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.
Latest posts by Timothy P. Murphy (see all)
- Important Estate Planning Tools for the LGBTQ Community - December 11, 2019
- Don’t Accidently Disinherit Your Children - December 9, 2019
- Your Estate Plan: Get It Into a Writing or Else - December 7, 2019