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Is your farm a pie or a business?

Agriculture.com Staff 07/07/2010 @ 9:09am

As a rule, parents want to treat their children equally. If one gets $100 for Christmas, they all get $100 for Christmas. If the daughter inherits Grandma's jewelry, the son inherits Grandpa's tools. Even Steven. Everybody's happy.

For many farm families, though, the largest and possibly only asset is the farm itself. How can it possibly be divided among multiple children, especially when some want to continue farming and some don't?

At a recent Women in Agriculture Conference sponsored by the University of Nebraska-Lincoln, David Goeller, a transition specialist with the University's agricultural economics department, and Lowell Moore, an attorney practicing in North Platte, Nebraska, tackled this question in separate sessions.

As a rule, parents want to treat their children equally. If one gets $100 for Christmas, they all get $100 for Christmas. If the daughter inherits Grandma's jewelry, the son inherits Grandpa's tools. Even Steven. Everybody's happy.

The first step in making any decision about what to do with the farm upon retirement or death is to identify your goals, Moore says. "Find out what family members, employees and other important people want," he says. "Don't make assumptions." Ask your children whether they want to continue farming, or if they plan to sell the farm.

"When you're looking at distributing your assets, you need to ask yourself if you want to pass the farm on as a business, or cut it up like a pie," Goeller says.

When it comes to passing on the farm, "Equal isn't always fair, and fair doesn't always mean equal," Moore says. "A lot of people can't get past this. They say, 'They're my kids, and they all get equal.' If that's your attitude, you're probably not going to be able to pass the farm on. The operator isn't going to be able to afford it."

One way to help make things fair -- although not necessarily equal dollar-for-dollar -- is through the use of life insurance. "Life insurance is a tool that can give those non-farm kids something as an inheritance," Goeller says.

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