Deciding to sell the family farm is one of the most difficult decision to make. I grew up on our family farm in Iowa that my grandparents bought back in the 1940’s. I enjoyed following my grandparents around doing chores while I was young, riding in tractors, and playing in the dirt. Now that it is just my dad and I running the farm, I could never imagine selling it. I know the emotional connection you have with your family’s farm and how hard this decision can be. However, sometimes it’s the only choice and what’s best for you and your family.
Inheriting a Farm with Multiple Family Members
Being an auctioneer and realtor, I’ve heard time and time again, “our mom/dad just passed away recently and now my brother/sister(s) want to sell the land we inherited”. Most often, the sibling I talk to is the one in charge of the estate or the sibling that has been farming the land and doesn’t want to agree to selling. Not only do I understand what it’s like to grow up on a family farm but also the, “I’m the only sibling that has interest in farming or does all the work” feeling. I was definitely the “tom boy” growing up between my younger sister and I. Even though my sister enjoys hanging out on the farm on the weekends and checking cows, she just doesn’t have as much passion and interest in farming as I do. Which is okay.
How to Decide if You and Your Siblings Should Keep the Family Farm
I know we are not the only siblings this way. It can be frustrating when it comes to deciding wether to keep or sell the family farm you now inherited. Or if you are reading this and deciding whether or not to sell your land or pass it on to your family, here are some secrets and tips.
Having the Important Conversation Now
I wish more families would talk before the passing of a loved one. My grandma got sick fast and passed away quickly, leaving the farm to her only living son, my dad. We know that her and grandpa’s wishes are to keep the farm running. If we ever get into financial troubles then it’s okay to sell a certain part of the farm. My dad and I know keeping the farm is best for us right now and we enjoy having it.
What is your plan?
However, this isn’t always the scenario for other families. I’ve seen siblings fight over what to do with the family farm and tear their relationship apart. Most often because of greed and other conflicts. I know that this is not what their parents would want. This can easily be avoided and save relationships if settled before the land owner passes. No one is promised tomorrow. It’s critical to have the conversation of what will happen with the family farm and have a plan. So what are the options you have for transferring the farm to your kids or other family/friends?
Farmland Transition and Estate Planning
How’d the conversation go with your the rest of your family? Do you know who would continue the farm? Do you know if some of your children could use the money now instead of owning land? Are any of the kids interested in owning the family farm? Are medical bills pilling up? Would you like to enjoy your hard work of farming over the years and retire? Depending on how you answer these questions, more than likely I would suggest selling now or dividing the land to inheritors now.
But you’re only saying this because you’re an auctioneer!
No, I’m saying this because of the drama that comes once you have passed. When there is no clear plan of what happens once your family inherits your land, this causes frustration, anger, and confusion. I see it all the time being an auctioneer. When more than one person inherits the farm, there’s always tension between members and emotional stress. My best advice is to sell your land now or divide the land to have only one owner. Here’s why.
Benefits of Selling Farmland to Avoid Family Conflict
Let’s continue with the scenario of one sibling wanting to keep the farm and continue farming and the other sibling does not and would rather have the money. As the landowner/parent you are faced with the difficult decision of deciding to sell now or let the kids figure it out when they inherit it. To avoid family conflict, I recommend selling now. Money from selling the farm can easily be split up compared to splitting the farm between multiple family members. If you’re worried about your child that still would like to keep the farm, as auctioneers we can help sell land to family members. We can do this by giving family per bid discounts. This allows them to have a fair chance at purchasing the land at a discount.
Or you could divide the land first. Then each sibling can better decide what they want to do with the part they inherit. You could even keep the part of the farm your child who farms currently and is interested in keeping for future years, and allow them to rent it from you. That way you have still have income during retirement years. Selling the farm now could also allow more flexibility of where each kid would like to farm.
The Family Farm is Not Everyone’s Dream
Have your children moved off the family farm and staring their own farmstead across the state? Would they like to re-invest the money into farmland closer to where they live now with a 1031 exchange? Are they trying to start their own business or need the money to cover expenses? Emotions play a great role when selling a family farm. Realistically, money can be split more evenly. Which won’t cause the family to tear each other apart compared to dividing the land. Everyone has their own passions and dreams. It could be very well that the family farm is not someones passion. As I mentioned above, I have the passion for continuing our family farm but my sister does not. However, I know she still deserves to enjoy the benefits to the family farm. She should earn income or money from it just as much as I do.
Continuing the Family Farm
Many of my clients who have inherited the family farm have said that they grew up on the farm in Iowa, but now live in a different state. It’s often difficult to let go of things that meant so much to you and your loved ones. If you don’t have interest in farming and nervous about the idea of selling and letting go, I encourage you to think of all the memories you have of running around on the farm as a young kid and write them down. This often helps my clients realize that memories will continue forever. Even if the farm doesn’t continue on in the family and share these memories down the road. You could also continue the family farm by renting out to someone interested in farming!
As an auctioneer, we can set up an auction for rent instead of selling the farm. It may surprise some people that our most common farmland buyers are still farmers themselves and not investors. If you’re thinking about selling, you could give the chance to a farmer looking to expand his operation. Or help a beginner farmer start his/her dream! The possibilities are endless and I’m here to help you through the process. I will listen to your ideas and wishes.
Helpful Resources for Transferring and Selling Farmland
Fear of what will happen to the family farm doesn’t need to cause you stress. There are several free resources to help you through the process of transferring the family farm. Iowa State University Extension and Outreach has several great resources to learn from for transition and estate planning. Resources can be found here. As someone who also understands grief and farming, I’m always here to answer your call or message. Don’t know where to start? I can make the process easy and comfortable for you. Let me handle all the details and answer your questions. I might be an auctioneer, but more importantly I will be your listening ear through everything. Whether you would like to vent or share memories, you can call me any day!
Rachel Hoy 515-954-8063