Organic Broadcaster

No farm heir? Start wheels in motion to find successor years before you retire

By Teresa Opheim

You and your family worked hard to make the land a better place. You want your farm to continue, but no one in your family wants to work the land. Off you go on the bewildering journey of finding a non-related successor for your land. Does it help to know that you are not alone? In Iowa, for example, 68 percent of farmers report they have no adult children who currently farm.

Dale and Sunny Nimrod of Decorah, Iowa, are happy their family’s farmland went to a family who will keep the land as a farm. Photo by Teresa Opheim

Farmland owners who have successfully transitioned to non-related successors have advice for you: start early. Decide what matters most for the future of your farmland. Look into strategies that will maximize your successor’s chance to succeed.

Transitions take time! One Minnesota farmland owner I know started 15 years ago, and has just now found the right non-related couple. I also have an Iowa farmer friend who is 80 and just starting the search for someone to take over his farm. That is simply not enough time to make this work.

You can’t have it all; so you need to decide which of these goals comes out on top:

  1. Provide a farm for a family to work
  2. Maximize income for my family

Asked another way: On a scale of 1 to 5, where do you fall? 1 equals “I want as much return as I can get from this land;” 5 equals “I want another generation to farm the land.”

Many need to maximize financial return with their farmland, and there is, of course, nothing wrong with that. It’s just that you should be clear how much flexibility you have in terms of return and timing for that return. That helps potential successors know whether or not they will be able to work with you.

Northeast Iowa resident Dale Nimrod’s story is a wonderful one
(see practicalfarmers.org/farm-transfer).

Nimrod’s parents purchased a farm in Southwest Iowa in 1944, but his father died before having an opportunity to work the place. Their mother was determined to raise her family on the farm, and did so with a lot of support from the nearby town of Stanton and the local church.

Years after Nimrod and his siblings, Faith and Vance, inherited the farm, they decided on their top goal for the land: to pay back the community that had helped raise them. They decided to sell the land, but didn’t just cross their fingers and hope that a nice farm family would be the highest bidder at auction. Instead they went looking. Nimrod contacted the Lutheran church in town and asked for recommendations of families who were active in the church and community, which is how he found the lucky Peterson Family.

Being part of networks like MOSES, Practical Farmers of Iowa and Sustainable Farming Association of Minnesota are other ways to find farmers who share your values. There also are a myriad of landlink efforts designed to bring land owners in contact with land seekers. The MOSES Land Link-Up is free (mosesorganic.org/land-link-up).
Also see www.youngfarmers.org/landlinks.

The Nimrods decided it was best to sell the land to the Petersons, and they sold it on generous terms that were based on the production value of the land (using farm productivity worksheets from Iowa State University), which “has little to do with the market price,” Nimrod said.

Neil Hamilton is another landowner who chose to sell. Hamilton grew up on and then inherited farmland in Southwest Iowa. He later offered the neighboring young farmer a 15-year land contract with a balloon payment at the end, because he believes “Adams County needs young farmers owning a piece of land” more than it needs people who don’t live nearby owning the land. “Historically this nation’s preference was not for tenancy but to convert tenants into owners,” Hamilton said. “Ownership was the goal for a lot of reasons—for security, for wealth creation, for stewardship. Not many people would choose to always be a tenant if they could own the land.”

If, unlike Nimrod and Hamilton, keeping the land in your family is a top priority, you can still help get another farmer on the land. Kate Edwards is a young vegetable farmer who has been successful on leased land near Iowa City, Iowa. If you chose this rental route or decide to run the farm business with your successor, it is even more critical that you two be a good match.

According to the organization Land for Good, transferring a farm to a non-family successor is often different in many ways. With a family transfer situation, both parties have likely known each other most of their lives. That isn’t as likely with a non-family successor. Whether you are leasing or selling, Land for Good recommends solid interviewing of the potential new farmers to get learn about work habits, work ethic, integrity, management skills, and growing skills.

Find some worksheets that might help at:
practicalfarmers.org/member-priorities/farm-transfer (see worksheets in the green box)
or landforgood.org/resources/toolbox/toolbox-landowners.

If you decide to give the partnership a try, you should know how to get out of the business relationship right from the beginning, recommend Bonnie and Vance Haugen, who farm in Southeast Minnesota. According to Kate Graham, an attorney with Maser, Amundson, Boggio and Hendricks, “The beginning of a working relationship is the most important time to formalize how decisions will be made and disagreements worked out because this is when everyone is feeling excited about working together and optimistic about the process. If you wait until a problem arises, and there is no decision-making framework in place, the whole situation can become very negative for everyone involved.“

Once that trial period ends successfully, consider a rental contract with a longer term. Would a crop-share lease work for you, whereby you share the risk? What about a flex lease, whereby you get a base rent and then a certain share of the profits in good years and the successor has a safety net in bad years? Are there environmental practices you want to spell out in the lease?

In your estate planning, you might want to give the successor an option to purchase, so that if your heirs do decide to sell, the long-term renter you chose will have first chance to buy. You can even spell out sale terms for the renter in your estate planning agreement. Most importantly: Make sure your heirs understand your land is not just a high-value investment, but also a sustainable farm for a family to work.

States and federal governments have realized that we have a serious need to get beginning farmers on the land, and have responded with a variety of programs. For example, beginning farmer tax credits—available in Minnesota, Iowa and Nebraska—allow farmland owners to earn tax credits for selling (in Minnesota) or leasing (in all three states) their land to beginning farmers.

If your land is coming out of the Conservation Reserve Program, consider the Transition Incentives Program, whereby a retiring farmer with expiring CRP land may provide a long-term lease or sell to a beginning farmer to transition it to organic production. The program gives the retiring farmer two additional years of CRP payments.

What should you do if you are not the sole decision maker about the land? Co-owners should start with goal setting and communications with each other before talking to successors. I have seen many a new farmer devote time and physical and emotional energy with a landowner in developing a succession plan, only to be cut off by other owners who don’t have the same priorities.

Use the excellent resources available to educate yourself about legal issues in farm succession. The websites farmcommons.org and www.flaginc.org are good places to start. But then high-tail it to an attorney who is an expert at strategies that will help you realize your goal of getting another family on the land. (Not every attorney doing estate planning will be good at helping.) Attorneys can be expensive, but can help you save money, expense and frustration down the road. You will pay them less if you come to your meeting prepared.

Looking for a non-relative to continue your farm is not easy. If you’re just getting started, find at least one small step you can take yet this year to further your progress in getting another farm family on the land. If you have had success, I would love to hear about it.

Teresa Opheim is a Senior Fellow at Renewing the Countryside and the Minnesota Institute for Sustainable Agriculture. Her email address is teresa@rtcinfo.org.

 

From the November| December 2017 Issue

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