Family Farmland: Navigating the Tough Decision of Selling or Operating for Future Generations
As a financial advisor, I have seen many of my clients struggle with the decision of whether they should sell their family farmland or continue operating it. It’s a tough decision that requires a lot of careful consideration. In the end, it all depends on your priorities and goals for the future.
One of the first things to consider is whether you own the farm solely or with other family members. If you are co-owners, it’s important to figure out how the management of the farm will work. Will everyone get along or will the operation come between family? This is a decision that might not be just up to you, so it’s important to have open and honest communication with your co-owners.
Another consideration is whether you are up for the task of managing the farm. Keeping track of expenses, figuring out the harvest, and negotiating rental contracts with farmers can be a lot of work and a source of stress for some people. If you enjoy managing the family farm, then it might be worth keeping it. However, if it’s a source of stress, then selling it might be the better option.
Emotional attachment is another factor to consider. You might have many memories associated with the farm, and the thought of selling it might cause you more stress than keeping it. I understand this sentiment since I also get attached to things that have memories. However, it’s essential to keep in mind how the next generation would handle it. Would they be willing to take on the stress of managing the family farm and carry on its legacy, or would they sell it right away?
Think of the farm as an investment. Is the property located near future development? If so, is it going to be worth more later? How much net income is the farm generating after expenses? This income stream may be nice to have in retirement. It’s also important to consider the effort required to maintain the farm and whether it’s worth it. If you sold the land, how much income would the cash earn through investments such as CDs or money markets? Would you have a higher income if you invested the cash?
Taxes are another significant factor to consider. If you have owned the farm for a long time and there is a substantial gain, taxes need to be considered. Currently, the cost basis is stepped up when someone passes away and owns property. It’s crucial to understand the tax implications of selling the farm and to consult with a financial advisor or tax professional.
In the end, the decision to sell or keep the family farm should be based on your priorities and goals for the future. While it may be a tough decision, it’s important to consider all the factors involved before making a final decision. Remember, there is no one right answer, and it’s essential to consult with financial professionals to help you make the best choice for your situation.
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Disclosures: The material presented by Rachel Wood is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Actual economic or market events may turn out differently than as presented. Rachel Wood is a Partner and Financial Advisor with Legacy Financial Group. Advisory services are provided by Legacy Financial Group, a registered investment advisor with the Securities and Exchange Commission. Materials posted to this site are from external sources and are provided for your convenience in locating related information and services. Legacy expressly disclaims any responsibility for and does not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.