Senior Partners

Keeping your farm and your family intact for another generation is a major challenge for today's capital-intensive farm businesses. Successors need to grow into new roles; parents need time balancing what's fair to on-farm and off-farm heirs. DTN's on-going Senior Partners series examines the financial, legal and emotional hurdles families face as they transition farm ownership from the senior to junior partners.

Minnesota native Glenn Krog hopes gifting farmland to his local community foundation will benefit Lake Benton, which has a population of 680. (DTN photo by Elizabeth Williams)

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Think how rural communities could rejuvenate if farmland rents stayed local rather than flowing to out-of-state heirs. That's why some farmland owners want their hometowns to inherit at least part of their land.

Farmland values and rents have soared since 2000, but much of that newfound wealth flowed out of rural areas. (DTN/The Progressive Farmer photo by Jim Patrico)

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Donating farmland to a community foundation or donor-advised fund can help rebuild rural America, advocates say. Here's how.

Federal and state capital gains rates can run in excess of 40%, a level which should be encouraging sellers to consider more installment sales, advises CliftonLarsonAllen CPA Chris Hesse. (DTN photo by Elizabeth Williams)

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Except for family sales, seller financing virtually vanished after the farm crisis of the 1980s when farmland values burst and many buyers walked away from their contracts, returning title to the original owners. Now even arm's length installment sales should...

Surviving the 1980s taught Don Cantrell to shrink his operating line to a minimum, a lesson he has passed on to his son, Kyle. (Photo courtesy of the Cantrell family)

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This fatherly financial advice is meant to prevent heartaches should the farm economy suffer another serious setback. Here's what veterans of the 1980s debt crisis want their children to remember, so their kids don't have to learn the hard way.

Overheated land markets make it more challenging to agree on how to structure sales in a family farm. The Kalsem family -- Cheryl, David, John and Mike -- agree they don't want to lock sales based on today's irrational prices. (DTN photo by Elizabeth Williams)

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There's more than one formula for valuing stock in a family business. Just don't wait for death, divorce or an imminent departure to set your terms.

The Burkey family of Seward County, Neb., formed a "donor-advised fund" to maximize their flexibility in tax-planning and increase the impact of their charitable donations. Pictured from left to right are Peg Burkey and her husband, Sid; Sid's brother, Tim; and Tim's son, Brant Burkey. (DTN photo by Anthony Greder)

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Donor-advised funds promote charitable giving while teaching family values. They work especially well as a tax tool for those with fluctuating farm incomes.

Texas widow Rebecca Crownover authored a book to explain her husband's death to young children like her daughter Acie. What would have helped ease her anxiety in the estate settlement was more documentation of who owned what in the complex operation she and her husband shared with in-laws. (Photo courtesy of Rebecca Crownover)

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Farm accidents can strike at any age. Good farm advisers and documentation of what couples own, farm lease terms and business roles after a partner's death can ease the grief.

Certified financial planner Walt Mozdzer recommends charitable gift annuities for retirees over 62 who are tired of low returns on bank CDs. (DTN photo by Elizabeth Williams)

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Charitable gift annuities let you reward your favorite charities while you're alive -- and receive a small income stream back in return. It can be a win-win in your retirement years.

CPA Nick Houle, of CliftonLarsonAllen, advises farm clients to use Charitable Remainder Trusts as an exit tool for expensive assets like land or machinery. This stretches out taxes owed over 20 years versus bunching income into a two- or three-year period, he said. (DTN/The Progressive Farmer photo by Jim Patrico)

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Retiring farmers can owe IRS 40% or more on assets they own after a lifetime of hard labor. Consider a Charitable Remainder Trust to lighten that load and reward good works in your golden years.

A slow sale to their employees over the next decade will allow Daphne and Lloyd Holterman to retire "one day at a time." They hope the new partners will avoid sudden sticker shock and the Holtermans will enjoy tax savings by stretching out their income and the satisfaction of knowing their life's work will continue. (DTN photo by Marcia Zarley Taylor)

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Less than one out of every three farmers has designated a successor, land grant university surveys find. Dairy farmers Lloyd and Daphne Holterman solved the problem by partnering outside the family and instituting a 10-year employee buyout.

Four generations of the Gorden family of Decatur, Ill., have a vested interest in their farm, even though none of 91-year-old Ken Gorden's descendants operate it. (DTN photo by Elizabeth Williams)

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For sentimental or practical reasons, some owners want their farmland to stay in family hands for generations to come. Sharing family stories builds commitment, but buy-sell agreements can impose disincentives to liquidate.

Executive coaches are common for young successors in the Fortune 500, but Colorado farmer Jim Hendrix borrowed the model to prepare his son Ben for the management track. (DTN/The Progressive Farmer photo by Ted Wood)

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Ben Hendrix was born to farm. But his father's prerequisites for a management job in the family business meant two college degrees, a policy banning a return for at least five years and professional tutors to fill in any knowledge gaps.

There is a complicated solution to getting appreciated farmland out of your farm corporation. It's worth it in the end if it saves your family millions of dollars in taxes. (DTN file photo)

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Digging highly appreciated land out of a C-corporation requires patience but can prevent double taxation. Give yourself a 10-year exit strategy.

Vermont farmer Howard Prussack's first overseas advisory experience was training vegetable growers in Nepal. "It was a highlight of my life," said Prussack. He has participated in three other Farmer-to-Farmer trips. (Photo courtesy of Winrock International)

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Aggies share their expertise and rediscover purpose as overseas Farmer-to-Farmer volunteers. It's the kind of second career that can make room for junior back at the home farm.

Pre-planning can save small estates thousands of dollars in probate and administrative costs, according to Iowa attorney David Bibler. (DTN photo by Elizabeth Williams)

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Not everyone owns a super-sized estate. Still, you need to take some simple steps now to minimize probate costs at death.

"Majority owners of farm corporations with minority shareholders now have a new concern," said Iowa attorney David Repp. "Do they purchase a new farm or tuck capital away to buy out a shareholder?"

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A landmark Iowa Supreme Court ruling forces on-farm operators to play fair with minority partners. That precedent means off-farm heirs may need regular dividends and farmland values close to market prices when they exit.

With Minnesota's newest gift tax, farmers will have great difficulty transferring ownership without a long-time horizon, cautioned CPA Nick Houle. (DTN file photo)

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If you're unlucky enough to die in any of these 13 high-tax states, your estate faces tax purgatory. That means you need to activate your estate plans while you're still young and healthy.