Family Farm & Ranch Planning

Protecting Legacies, Creating Generations of Opportunities

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Preserving, working, and enriching Texas agricultural land is deeply embedded in what it means to be a Texan. And for most, maintaining that heritage comes down to small, family operations. Though we may not think of the family farm or ranch as a business, it is. And for our agricultural landowners and producers this means taking a closer look at both your family dynamics and business dynamics so that you protect your legacy while creating opportunities for the next generation of landowners and producers.

 

One of the problems faced by family operations is that they tend not to outlive their founders. Roughly 30% of family farms are still operating by the second generation. And a mere 12% survive into the third generation. That isn't good considering most of our American agricultural production consists of family operations. Consumers rely on these families to feed themselves and their own families. Why is it that we have such poor transfer numbers when nearly 70% of family farm operators expect their operation to continue as a family business after they’re gone? Well, only 23% have created an intentional and active succession plan. 

 

Many rely on what their grandfather or grandmother did, a simple will, and, honestly, feel blessed (because they got lucky) that the land and the operation successfully transferred to the next generation who was able to keep the land in agriculture. Praying for rain fits the life because we can't control the weather, but praying for a successful transfer is a disservice to those who came before us and the hard work we've put in to keep the dream and lifestyle alive. The saying, "God helps those who help themselves" really is a comment on the long-game of inter-generational land ownership and stewardship.

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At A. McMurrey Law Firm, PLLC, we help families protect their families and their family businesses to make generational transfers that ensure the continuity and lifespan of the family operation and the opportunities that come with living and working with the land. Please reach out to us if you're curious about how to get started. We'll answer your questions and get you started today.

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Planning for the Future – Changes in Ownership and Management Are Key Concerns

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The family element in every family operation can mean the difference between its success or failure during the transfer process. The retirement, disability or death of the farm operator or landowner are all common events that can trigger a transfer and we want you to be prepared for when, not if, that transfer arrives unexpectedly.

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Tough questions must be asked and answered:

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• Who will run the business in the future?

• Can the surviving spouse, a child, or a non-family member key employee continue its daily operations?

• Is the surviving spouse financially dependent on the success of the business in the future?

• Is the operation dependent on off-farm income?

• What arrangements have you made for the inheritance of your children who are not active in the business?

• Have you in-law proofed your estate?

• Are you trying to preserve your legacy for your grandchildren? Have you considered grandchildren that may want to run the business in the future?

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These are just some of the questions we help you address when determining what appropriate tools you might be interested in having in your plan. We don't do cookie cutter planning because the risk is too great that something will be lost, overlooked, or too inflexible. Instead, we offer a thorough analysis of your family and financial dynamics to generate options that meet your specific goals. From there, you choose your own path that is tailored to your specifications.

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Coordinating Plans

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Business, finance and estate plans must be carefully coordinated. An appropriately-funded estate plan can meet all of your people-planning objectives and provide financial-planning objectives for operation costs, debts, taxes, retirement, and long-term care. And this type of coordinated care doesn't have to happen all at once.

 

For some, we recommend they get a simple estate plan in place immediately and perfect it over time. For example, step one can be some basic essential coverage: a simple will, emergency documents for your health and finances, and a burial directive. This ensures your family isn't scrambling or fighting over who's in charge or what is supposed to happen during an emergency or death. Step two of securing a successful transition is possibly forming a limited liability company for the land ownership. This method can help reduce tax consequences on your heirs and help protect the land from certain liabilities. Step three is later forming a second limited liability company or limited partnership for the farm operation or management company. This is when we set up a landlord-tenant relationship between the two entities, your land LLC and the management LLC. In doing this, along with a strong operating agreement, life insurance policies, etc. we create an independent, active plan for emergencies, transfer of wealth and management to the next generation. Step four, when funds allow, may be establishing a revocable living trust and pour over will so we can reduce the need for a probate proceeding. What we are demonstrating here is a coordinated estate, business, and succession plan that is tweaked, adjusted, and built over time as the farming enterprise has changing goals and finances.

Cost is always a concern and it should be. Understand this, there is an estate plan at every price point. The problem is when clients wish to have a champagne on a beer budget. It is also easy for some in agriculture to be a “penny wise and a pound foolish” when it comes to legal services. It is paramount to find an estate planning attorney that understands the unique dynamics of your farm family and agribusiness. An estate and succession plan should be something that every farm and ranch family should budget and plan for; as stated earlier, it can be done in steps to aid in affordability.

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A. McMurrey Law Firm, PLLC can help you make informed, family-oriented decisions that put you in the driver's seat. We support you to know your options, risks and benefits, and coordinate all business, finance and estate plans to ensure your family goals and objectives are met. Please reach out to us today and let us know a little about where you are in the process. We are here to help you.