A common phrase you hear here in east central Pennsylvania is “my family used to farm.” Unfortunately, as more and more generations become removed from the farming industry, less people understand the particular struggles that go along with farming. The less people that understand farming, the less advocates there are for the farming industry and the unique way of life that it provides. The state of Pennsylvania’s sale of meat, poultry, and fish products generate more than $4.3 billion annually. (PA Department of Agriculture). Despite this fact, less than 2% of Americans actively work in agriculture.
If you are currently farming for a living or even on the side, you may be asking; how do you protect your farm for generations to come? What are the best tax decisions to be made? When is the right time to start?
The time to start is now.
The hardest part about farming is deciding when the timing is right to plan for the next stage. The farming schedule never ends and when there is free time, no one typically wants to spend that time with their attorney. With most small farms in this area it is not uncommon for grandparents, parents or other family members to live in the farmhouse while another generation works with the land or the animals. The farm is typically still titled in the name of the elder generation and the profits are used to sustain the family as a whole. In some cases, the farmer owns and farms their own land and many other farmers rent land from landowners. How do you know what is right for you, your family and your business?
There are a variety of items to consider:
What is the long-term plan?
- If you run a dairy cattle operation now, do you anticipate milking for another 10 years? Will you start bottling on site? Do you want to make a change to something less labor intensive, like milking with a robotic system? Do you anticipate growing and adding employees or down-sizing so you do not have to depend on outside labor?
- If the property remains in the name of the elder generation, and they end up requiring some form of nursing home care, your farm could be at risk to be collected upon by the state after their death. Additionally, your family may benefit from exploring programs currently available like the Clean and Green program, Farmland Preservation or entering into an Agricultural Security Area.
What are your financial goals?
- Do you want to make small steps or are you ready for the big leap? Do you have the land necessary to make your goals happen?
- Some operations are both sustainable and profitable on smaller tracts of land (for example: a farmer’s market), while others require larger tracts of land (for example: a large hog farm operation). Whether your farm is large or small, you should consider protecting the farm’s assets from liability as much as possible. While there is no way to completely eliminate risk, there are ways to manage and reduce it so you can continue to enjoy doing what you love and protect it for generations to come.
What do you have in writing?
- In farming, a handshake and someone’s word are commonly the best currency. Unfortunately, that does not always protect you in the eyes of the law. Even a simple lease can be critical protection for both the landlord and the tenant in regards to liability.
- Farms can be especially vulnerable during a divorce. While many people would like to pass their farm onto their children and their children’s spouses, this creates numerous issues if they gift the farm directly to the child/spouse and a divorce occurs. A pre- or postnuptial agreement can mean the difference between keeping or selling the family farm.
If you are concerned about the future of your farm and would like to work together to protect what you’ve worked generations to create, please schedule a free consultation with Jessica M. Lehman, Esq. at (570) 784-6770 ext. 204. Jessica grew up on a farm outside of Bloomsburg and practices in the areas of real estate transactions, business formation, family law, and estate planning.