Today, Kansas is known as a leader in wheat, grain sorghum and beef production. The dairy sector is also expanding rather quickly along with other sectors of animal agriculture. Farmers and ranchers across Kansas are responding to the growing demand from consumers to raise healthy, wholesome food while using fewer resources.
Agriculture is not only a principal factor in the state’s history, but it continues to be the present economic driving force. As our planet’s population gets closer to nine billion and the demand for livestock farming increases, Kansas farmers and ranchers will continue to play a crucial role in feeding the world.
The Farmers’ Market in Overland Park
The Farmers’ Market in Overland Park, Kansas has created a great sense of community for its residents. Located at 7950 Marty Street, the Farmers’ Market has provided “farm-to-table food” for more than 30 years, with more than 70 quality vendors. The market offers its customers a huge selection of fresh produce, local foods and unique specialty items. This hugely successful industry demonstrates the strong agricultural tradition that exists in Kansas, where agriculture continues to be a significant contributor to the state’s economic well-being.
Understanding the benefits of farm planning
An estate plan is a strategy for the distribution of your assets after your death. For farmers or ranchers, having a proper estate plan can serve an even bigger purpose. When you are no longer in control of your farm, it is crucial that a plan is also established for a smooth transition of ownership and management of your farm. Planning ahead can provide security for your family, even those who are not actively involved in the farm. The execution of farm planning is complex and very important to the survival of that legacy.
Why is a farm estate plan important?
According to many, at least one-fourth of our nation’s farms will change hands in the next decade. That typically means the family farm will be passed on to the next generation. When that occurs, these lands become at risk of being converted to other uses. Farm planning is critical to our country because it guarantees that productive farms and ranches, like those in Kansas, will remain available for agriculture. Farm estate planning is also important for families who intend for their families stay in the farming industry and maintain the legacy that has already been created.
What are the primary goals of a farm plan?
A good estate plan for a farm or ranch needs to accomplish the following four goals:
- Transfer ownership and management of the farm, land and other assets to a new operator;
- Avoid unnecessary transfer taxes, such as income, gift and estate tax;
- Ensure financial security and peace of mind for generations; and
- Cultivate the next generation’s management capabilities.
Although a will can be an important part of your overall estate plan, a will alone does not secure the future of your family farm.
Useful transfer and tax reduction strategies
There are various ways to plan for the transfer of assets and overall management of a family farm to the next generation, while reducing taxes as much as possible. Annual gifts can be used to transfer the business, while reducing gift taxes by through the application of the annual gift tax exclusion. Another technique is to gradually transfer management responsibility for the farm, along with asset ownership, to your loved ones, which can help make the transition much smoother from one generation to the next.
Using a buy/sell agreement for business transitions
If you aren’t a business owner, you likely have never heard of a buy/sell, or buyout agreement. This type of agreement protects businesses, including farm owners, when a co-owner leaves the business for whatever reason. If a co-owner wants or needs to leave the business, retire, sell his or her shares to someone else, gets divorced, or passes away, a buy/sell agreement protects everyone’s interests by establishing the price and terms for a buyout. Buy/sell agreements can guarantee that a farm is transferred in the proper way.
The benefits of an Agricultural Conservation Easement
Another important tool is an Agricultural Conservation Easement, which can provide permanent protection for farmland and stop non-farm development. It can also significantly reduce transfer taxes when 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 practices which have the potential of damaging or interfering with the agricultural use of the land. Because the easement is essentially a restriction on the deed of the property, the easement will remain in effect even when the land changes ownership.
If you have questions regarding farms, or any other farm estate planning matters, contact Gaughan & Connealy for a consultation either online or by calling us at (913) 262-2000.