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July 23, 2014

Keeping the Family Farm in the Family

Like many Midwesterners, I grew up working on a farm. I lived just across the road and about a city block North of my grandparents' dairy farm in rural Minnesota and I grew up helping them on the farm.  I have a lot of very fond memories of being a "farm kid."  After a number of years, due to my father's deteriorating eyesight, my parents got more traditional 9 – 5 jobs and we all stopped doing substantial farm work. Another family member took over helping my grandfather and ultimately that family member inherited the entire farm.  This family member chose not to maintain the dairy farm, which created a lot of concern among the family that the farm land -- some 600+ acres of fields and forest and our grandfather's legacy --might be sold off and lost to strangers. 

The family farm is becoming extinct in this country. If you have this fear about your own farm, or a farm in your family, there is a potential solution.   While farming is a way of life, it is also a business – and not a 9-to-5-paid-vacation-and-sick-days kind of business. Farming is the definition of "hard work".  It is not a way of life that works for everyone, and often times farm families split – some leave the farm, leaving one or two relatives to take over the business when the parents are ready to pass it on.  However, those children that leave don't necessarily want to give up the land to be used for activities like hunting, or ATVing; or they may enjoy doing field work and benefitting from those profits (hay, stray, soybeans, etc.). 

Believe it or not, an attorney can help keep this family business in the family, serving both those who stay and work on the farm, and those that just want to secure the real estate.  Putting it in the simplest terms possible, this plan consists of separating the "land" part of the farm from the "business" part, and putting each of those parts into a different entity Those working on the farm earn the profits that come through the business entity, and they in turn pay rent at fair market value to those family members that are not working on the farm. While it is much more complex than just creating two separate entities, and every family farm structure is different, there are solutions that will help you keep your family's farm in your family.

(Editor's Note: Attorney Jessica DesNoyers authored this post while working in Varnum's Grand Haven office. Jessica is currently with another firm.)

© 2014 Varnum LLP

About the Author

Associate

Jessica is a staff associate in the firm’s corporate practice group. She is a regular contributor on estate planning matters in Varnum's blog, under the Legacies category.

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