Wednesday, December 12, 2018
4.9 million acres. That’s how much land the South Carolina Department of Agriculture says is farmed in the Palmetto state. Another two-thirds of the state is covered by forests. All in all, these lands produce an astounding $3 billion worth of agricultural products each year.
The stewardship of our state’s natural resources is something to be proud of, and it is something we should prepare to pass on to the next generation. Unfortunately, it is becoming increasingly difficult to transfer agricultural lands without doing some careful estate planning.
The estate planning laws that apply to farmers aren’t different than those that apply to anyone else, but the farming lifestyle and the type of assets involved meaning planning must be done deliberately.
The biggest problem facing farmers who are ready to start estate planning is not the estate tax, which many of them fear. It is the fact that most of them have no strategy for paying for long-term care. We’ve seen a number of families devastated by the fact that they had to sell land that had been in the family for generations in order to pay for a loved one’s nursing home care.
Even when the next generation can step up and purchase the farm, it leads everyone to ask just how many times the family is going to have to buy the same piece of land. Fortunately, there are many potential solutions to this problem. It may be possible to incorporate and transfer ownership via stock. Or it may be a good idea to separate the land itself from the farming operation. These solutions aren’t straightforward, and that is why it is increasingly important for farming families to seek out the advice of an experienced estate planning attorney.
Speaking of thinking about the land as being separate from the operation, modern farmers often lease land that in prior generations would have been worked by a neighbor. A comprehensive estate plan should include plans for these lands as well, even though they are not owned by the family. One way to do this is to secure a right of first refusal, which gives the family the option to buy the land from the current owner if the current owner decides to sell their land in the future. Another good thing to do is examine the existing leases to make sure they are up to snuff.
Family farms aren’t going to look the same or work the same when the next generation takes over, but that is not anything new. Nor is it something to fear. We aren’t growing the same crops or using the same techniques that were used when our state was settled, or as during the War Between the States, or as 50 years ago. Each generation has embraced changes and thrived, and we are on the cusp of yet another era of change and transition.