96 percent of the 2.2 million farms in the United States are considered “family farms,” according to one planning and tax expert. Passing down those family farms to future generations is not an easy task.
Agriculture is a tricky business said Ruby Ward, a taxation expert from Utah State University. Farming is risky because commodity prices can’t be controlled and neither can the weather. But, coming up with a plan to transfer the assets to future generations is something farmers can do.
“It’s really a roadmap to where you want to be,” Ward said. “If you don’t care where you end up or you don’t care whether or not it transitions as an on-going business to that next generation then you don’t really need to care. If you do, it’s something that has to be really deliberate because it’s not just about transitioning the assets, but also how to take on the risk and the responsibility and the financial components and all those types of things.”
Just last week Ward held a workshop in Utah community of Santaquin to help farmers with the complex process of estate planning. Out of the all the family farms in the United States, only 30 percent will transfer successfully to the second generation and just 10 percent will make it to a third generation.
When proper planning doesn’t take place, farms are usually sold, usually to larger businesses, corporations and development, according to the U.S. Department of Agriculture. Since 1970, the number of family dairy farms has dropped by more than 90 percent. Other sectors in the agricultural industries are following the same trend.
Ward said family farm businesses are important to the economy. Keeping the farm in the family requires more than just a will, there needs to be a plan.