Farms are a fixture of the McLeod County landscape. In the case of family farms, chances are they’ll need to be passed along to successors within a few decades.

Experts have suggestions to follow before that process begins.

According to Karen Johnson of the McLeod County University of Minnesota Extension recommends having a sit-down with family members – both successors and non-successors.

“Farmers are passionate about what they do,” Johnson said. “When I talk to folks, there’s the question of whether they’re ready to let go of the farm and let someone else make financial decisions. I think people can run into the differences in misunderstanding each other and expectations.”

Those expectations, if not clarified and outlined, can hinder the pre-process, Johnson said.

“It’s a matter of what mom and dad think the farm should be versus how successors want the farm to be,” she said. “Having that conversation and having people on the same page can be beneficial to moving a succession forward.”

Johnson also advised having those expectations written down, as having a concrete plan makes a successful process more likely.

After this, according to her, a farmer should determine whether succession is viable.

“On the individual level, you have to take a step back and think about the planning step to have those materials pulled together before you get into final details with an attorney,” she said. “You need to understand your financial position. Is there enough income at this point that you can transfer the farm, have enough money to retire and set up the next generation for success?”

The first point of contact when beginning the succession process could be any of an array of experts like bankers, accountants and attorneys, Johnson said. Attorney Curtis Bradford of Bradford Law Office in Hutchinson said the succession is a complex matter.

To simplify the matter, he said, there are three points of an appropriate order of progress.

“(One must ask) to whom would we want this farm to go?” he said. “Sometimes it’s one successor or five. After determining this, there are estate taxes. Then there is the method of transference.”

An estate tax is the tax levied on a successor’s inherited property if the property value exceeds the exclusion limit set by state law.

“In the state of Minnesota there exists a family farm exclusion of up to $4 million in value, which is excluded from the Minnesota state tax, which itself is $2.4 million,” Bradford said. “Most family farms fall within the $4 million exclusion and allow family succession without the undue burden of estate tax.”

The method of transference can range from a will, a trust, through a corporate entity or through gifting.

“The overriding reason families should avoid gifting, if possible, and rather complete the transfer upon the death of the owner is to obtain a stepped-up valuation of the inherited property,” Bradford said. “(The property) has a capital gains tax when and if the beneficiaries sell the farm at a later date.”

Johnson said that although an attorney, paired with a tax specialist, may be the first point of contact, a farm-owner may also enroll in a business management plan for record-keeping. The important thing, she said, is to bring a solid plan with you when speaking to experts.

“Logistics are easier done when you can bring clear goals to attorneys and bankers and have them help,” she said.