Virginia Cooperative Extension -- Farm Profitability & Succession Planning

Farm Profitability & Succession Planning

Tim MizeFauquier County, VCE

What is Cooperative Extension?

• A local extension of the Land Grant Universities.• Nation wide.• 107 offices in the state of VA.• Program areas:– Agriculture and Natural Resources– Family and Consumer Sciences– 4-H Youth Development– Community Viability

Loss of farmland

• Are farms retirement funds?

• No dialogue between generations.

• Unwilling to transfer management.

• No willing future Participants.

Farm Profitability

• Are farmers land rich and cash poor?• Farm real estate (land and structures) is the

major asset on the farm sector balance sheet, accounting for 84 percent of the total value of U.S. farm assets.

• 2 million to produce 20 million/reverse for farming.

Farm Profitability

• Fauquier county- 12th biggest agriculture county in state.

• Cattle calves is the #1 enterprise, 13th in state, 96th USA(3076)- 434 farms with cattle.

• 78% farms have less than 50 cows, average 30?• Gross income- $26,686 (2009 19,356) – $13,136.23=

$13,549.77 return to equity, management, and family labor. (50 cows $22,540)

• 30 cows =75 acres, 50 cows=125 acres

Farm Profitability

• What works for Fauquier?• Get big/ get efficient• Direct market/branded products• Niche/high value• Agritourism• Farms in the middle? 182 acres

Documents for your Estate:Pick the most important

• Which is most important?• Advance Medical Directive• Will• Life Insurance Policy• Power of Attorney• Trust• Business Organization (LLC or Corp.)• Estate Tax Management Plan

Power of Attorney

• We have a better than 70% chance of going through an extended period of incapacity before we die.

• The Executor of your Estate has NO authority whatsoever as long as you are alive.

First Steps in Estate Planning

• Owner(s) of the property need to decide what they want to become of the land.– What do I want to happen?– What do I need to happen?– What do I hope happens?– What do I fear may happen?

• Establish mission statement/objectives/goals• Evaluate human resources. Be honest.

First Steps in Estate Planning

• Communicate that decision:– What makes these conversations so difficult?• Perceived as ungrateful.• One side to the story.• Heritage and an asset.• Generations.• One Truth?

Have a family meeting

• Write a shared family vision.• Write shared goals.• Seek the help of competent

transition planners.• Maintain open communication.• Make no assumptions about the

feelings or plans of others.• Of all the different parts of Estate

Planning, the Family Meeting will be the most difficult in almost every single case.

Elements of Your Farm Transition Plan

• Family Meeting• Financial Plan for Retirement and Long Term

Care• A Plan with Defined Goals for Involving the

next generation in our plans and the estate• Legal Instruments (PoA, Will, LLC)

• We all know that preserving our farms means more than permanently protecting the land. We also must ensure that families who want to pass their farms to the next generation have the knowledge and resources to accomplish this important goal.

Programs

Programs

Programs