A quick glance at the financial forecasting for American farms in 2024 can leave one feeling disheartened regarding the estimated 25% decrease in profits from 2023. According to the American Farm Bureau Federation in February 2024, “A year-to-year drop of this magnitude parallels a recent decline in general farmer sentiment as lower expectations set in for commodity prices in 2024. Importantly, this is still a very early measure of farm financial health. Countless factors will shape supply and demand conditions over the course of the next 11 months.”
This reality for the farming families across Pennsylvania, and the ripple effect it has on our communities, makes supporting the family-owned farms and ranches across the Keystone State a meaningful focus of the estate planning practice area. It is important for farmers and other landowners to understand that there are tools and planning strategies available to them.
Mike Cherewka has been working with farmers across Pennsylvania for decades and has a deep understanding of nuances of this industry. The biggest piece of advice Mike has for farming families is to start the planning process early. It’s important that people ask themselves, “What is it that I really want to do?” Breaking that question down even further, here are three questions to help spur a conversation between farmers and their estate planning attorneys:
What is everything that I need to protect?
The key to truly protecting one’s agricultural assets is to first separate and catalog the individual asset groups. This means recognizing that a thoughtfully crafted estate plan will utilize different protections, insurances, and planning tools for different assets. Categories for assets will include but might not be limited to: the land itself, livestock, machinery and other capital resources, timber, sub-surface elements, and most importantly – the people working the land. For example, a dairy farmer will want to separate out his cattle from the actual land the herd grazes on, from any equipment used in growing feed and collecting and storing the milk, while also having necessary insurances in place.
Who wants (and doesn’t want) this responsibility passed on to them?
This separation process can be especially challenging when not every child wants to take on the mantel of working the land as their chosen profession. Like any other family-owned business, these decisions are personal. It can take years for a mother and father to understand that when it comes to their children’s inheritance, equal isn’t always fair.
It is not uncommon for one sibling to embrace the farm or ranch life while another goes down an entirely different and unconnected path. Then there are the instances where a child doesn’t want to work the land, but still wants to live on the land. One hurdle that an estate planning attorney can help navigate is when the property is zoned for agricultural use vs. residential vs. commercial. Parents may decide to separate the land and gift a portion to one sibling to live on while keeping the working portion intact. By separating out the assets, it is easier to direct how to equitably distribute inheritances.
What could be next for my land?
This is an evolving practice for many reasons including the innovative ways that the current generation of farmers and landowners are utilizing their land. Some creative solutions include regular planned timber cuts on the property and leasing sub-surface resources such as oil and gas. These can be separated out from the other land components for estate planning purposes, meaning owners can profit from the distribution of these elements while maintaining farm operations and without giving up rights to the land itself.
Other farmers are embracing their land’s allure and sharing the joys of agriculture through farm experience businesses such as interactive animal exhibits, flower, fruit and berry picking, and farm experience “vacations.” Other farms have changed their traditional practices (dairy to beef) or traditional outlets for their products (area farm markets, direct sales to “farm to table” restaurants). By opening their (barn)doors to the public, not only can farmers potentially profit from just having appealing land, but they also gain advocates from within the community to support them through times of succession and change.
According to Mike, “The best part about working within agricultural law is hands down the people. I’m always going to want to do anything I can do to help protect what they have. And because it can be such a long process from when a client first recognizes their need for estate planning support to when all assets have been sorted out and specifically protected, and all connected parties included and secure in final plans, there are times my role is part-attorney and part-counselor. This is truly a relationally-driven practice.”
