Of course you know, though, that a plan is essential, especially when it comes to farm succession planning.  Questions of fairness are personal and difficult to discuss in a family business.  These are the kinds of questions your lawyer will prompt you to consider when you start making your plans.

I recently ran across an excellent summary of how to start thinking about farm succession planning:  Succession Planning and the Family Farm.  The authors make some excellent points:

• According to the USDA, approximately 96 percent of the 2.2 million farms are classified as “family farms. The average age of a farm operator is 57 and the fastest growing segment  is those over age 65.  These ages suggest the need for planning for transitioning due to death, disability or retirement.
• At time of transition, two options (1) maintain the operation while transitioning ownership to a son or daughter;  or (2) shut down the farming operation and sell or lease the land. Most would prefer to transition to family. To make this transition more successful, farmers should identify and train potential successors early and determine
  what they will need to know and do to qualify as a successor. Although farmers would prefer to retire when they choose, the plan should include all scenarios and consider the financial needs for both the farm operation and the succeeding children in each scenario. Some options would include lifetime purchase, an inheritance, a purchase from the estate, or a long term lease. Financial needs might include financing from a bank, parent financing, disability and/or life insurance. Starting early will increase the liklihood of insurability and affordability.
• Dividing the farm among all children is not always the best idea. It might be better to gift other money or items to non-farming children.  Life insurance can benefit your planning by providing a source of funds to for non-farming children to inherit.
• Start talking to your children early about what the plan is and make sure everyone is in agreement. Revise the plan when necessary and continue to communicate.
• Your attorney, accountant, financial planner and insurance professional should all be involved in the planning. In addition a business coach or planner can be helpful in this process. The failure to plan can cause financial problems for all involved and can even result in forced sale of land to pay for taxes or other debt, proper planning will allow the farm to endure while caring for the needs of both generations.

The whole article is worth a read.  And if you haven’t done any succession planning yet, please do so now, whether you are retired, nearing retirement or in the middle of your farming years, there is no better time than now.  The sooner you begin your planning, the more options you will have to successfully transition your farm.

As I got older, I graduated to driver.  That meant that I got to drive the tractor and wagon forward and then hop off and pick with everyone else until it was time to pull forward again.  My favorite part, though, was switching all the tractors between fields, when we could get the tractors up to top gear and drive full speed (not all that very fast in an old tractor) down the gravel roads.  It was a fun bit of freedom, but it was important work.  Without our help, my dad would have spent hours shuttling our wagons and tractors between fields by himself.

My parents and uncle always paid us for our work on the farm, and we worked hard.  We started each day before 7 am and worked alongside the adults.  When it came time to go to college, each of us had a small nest egg that helped us pay for some of our computers, books, room, and tuition.  And today, we are all hardworking adults.  Between the four of us, my sisters and I own our own businesses, working as doctors, lawyers, and marketing professionals, while managing growing families.  Several of us are employed in agri-business.  I work with farmers in my law practice.  And my parents and the rest of us run a family farm winery, Four Daughters Vineyard and Winery.  We work those same long hours, actually getting our hands dirty in the fields, and we are thankful for the strong ethics our farming background instilled in us.

Which brings me to my point…we were able to learn those skills because regulations allowed farm kids to work on their family’s farms for pay.  Farm labor laws currently exempt young farm workers from Department of Labor standards if they’re working on their own family’s farm.  A proposed change in that law would prohibit farm kids under 16 from operating most machinery or working with livestock.  The stated goal is to protect kids from dangerous conditions on the farm, but the change would only affect hired farm workers.  In effect, farm families would be prohibited from paying teens under age 16 for their work on the farm…or those paid farm kids would be prohibited from assisting with many jobs they’ve historically done.   This USA Today article describes some of the changes.

Some legislators who grew up on farms understand that kids learn great work ethics and earn good money working on their family farms.  Legislation is underway calling on the DOL to withdraw its proposal.

Farm families should watch this legislation and the proposed changes closely.  If it passes, it could mean serious changes in the way that families conduct their farm business.

Our area is awash with stories of recent rent and land auctions where the land rents or sells outright for prices previously unheard of in this area.  MPR reports that farm land is selling at prices that may make it difficult for farmers to turn a profit, even with record prices for corn and soybeans in recent years.  I spoke with a local farmer recently, and asked him if he was in the market for more land.  Even though he has potentially 15-20 years of farming in his future, he replied, “I’m not sure I’ll be farming long enough to pay back a loan at today’s land prices.”

The banker I spoke with described conditions in farming during the 70s and 80s that led to a historic farm crisis.  When banks called in their loans at that time, attorneys assisted farmers with negotiating principle reduction plans or farmland swaps (give us X amount of land and we’ll leave the rest of your farm alone).  We have seen today’s bankers involved in the current housing crisis extremely reluctant to participate in any sort of principle reduction.  How likely would ag lenders be willing to do the same on today’s large loans if the market dropped?  Recounting yearly crop yields and weather conditions, the banker went on to tell me that rising yields and prices, combined with nearly 20 years without a total crop failure in Southeastern Minnesota, have left many local farmers in good shape.

Farming has a lot of variables, many of which cannot be controlled in any reasonable way (weather?).  Let’s hope those factors continue to be favorable to strong profits, so farms can keep up with rising land prices.

All of these laws have culminated to keep hog farms away from people, which means they may have inadvertently become a prime target for thieves.  Hog prices are high right now.  Corn prices are also high.  So it’s relatively expensive to feed and grow a hog to market weight.  But a thief who steals a fully -grown hog may have just found himself a tidy profit.  One farmer, for example, estimated his losses at $30,000.  Because non-farmers who move to the country often want peace and serenity, they can be surprised at the sounds and smells of agriculture.  Farmers have responded by making their barns more automated, locating them on gravel roads, and keeping them out of yards and housing areas.  Responsible farming that keeps neighbors happy.  Consequently though, there are fewer watchful eyes to protect the farmer’s work.

I imagine farmers will be watching more carefully.  As rural neighbors, I hope we can do the same.

Lawmakers are debating a Farm Bill. This article in Ag Week discusses one legislator’s views on the direction the country might take with a new Farm Bill.

The Eagle Tribune reports a pig farmer in Massachusetts is fighting a recent decision to disallow his proposed piggery.  Law protecting the right to farm vary across the country.  Here in Minnesota, there have been many attempts to protect animal farmers from nuisance claims, including the Right to Farm Law in Statute 561.19.  In many cases, though, these laws protect existing operations from new neighbors disturbed by oderrific conditions, not new operations.

South Dakota is considering cutting taxes on wind farm development, in order to better compete with neighboring states.  Minnesota is home to many wind farms, and many landowners, farmers, and retired farmers appreciate the opportunity to earn a little extra money each year from their windmills.  These contracts are often long-term, run with the land (that means your heirs will be bound by the terms of the contract), and heavily weighted toward protecting the developer and not the farmer.  A gentle reminder: if you are considering signing a windmill contract, bring the easement and other documentation to your attorney to be sure you understand exactly what you’re signing.  Too many times, clients have brought in already signed and recorded windmill easements and were disappointed to discover the terms were not very favorable to their wishes.

Drier Weather Allows Farmers to Catch Up on Planting. http://www.postbulletin.com/news/stories/display.php?id=1457616

Local Author Writes to Preserve memories of Farm Life. http://www.agrinews.com/local/author/writes/to/preserve/memories/of/farm/life/story-3644.html

Pesticide Residue Taint 98 Percent of Apples. http://www.foxnews.com/health/2011/06/13/pesticide-residues-found-in-8-percent-us-apples/

One thing that always strikes me though is that many attorneys from the Twin Cities metro area have a hard time relating to the legal issues rural Minnesotans face.  At one point in a seminar, someone pointed out an issue that relates to farms and then noted that “we” won’t have to deal with that.  And I can’t count how many times I heard the word “outstate” yesterday.  That word always makes me pause, wondering whether the metro area really is “in-state” and all of the rest of us are just out here somewhere unimportant.   In my experience as a practitioner and a rural citizen, rural residents don’t think they live out of somewhere else.  We live here.  And here is a pretty great place.

So my advice today?  Consider whether your lawyer understands the issues you face as a farmer, a rural business owner, a small town resident.  My law office on the border of rural Mower, Fillmore, and Olmsted counties practices big city law with small town values.  Just recently I was told, “I can’t believe there’s a Harvard lawyer in Grand Meadow.”  Well, why shouldn’t there be?  I think we rural citizens deserve world-class service, and I’m happy to be a part of that goal.  I hope to see you in my office soon!

We have something similar here in Minnesota for teens ages 15 and up.  The Farm Work Driver’s License allows drivers under age 21 to apply for a special permit to drive for farm purposes.  The benefit to the farm work license is that children can obtain the permit before passing the road skills test.  Farm teens must pass a written test, take behind-the-wheel training, and show proof that the family is engaged in farming (land deed or rental contract).  There are specific rules about where and when farm kids can drive, but the end result –another licensed driver– is pretty handy for farm families during busy times on the farm.

My sisters and I got our farm permits when we turned 15.  And you can bet that my family needed our help transferring vehicles between fields, giving rides, and delivering meals and supplies.

But having an LLC, a C-corp, or an S-corp is not a magic cloak that protects you from liability.  If you don’t follow corporate formalities as the owner, someone suing you could potentially attack your personal assets as well.  There are many reasons a court might decide to “pierce the corporate veil” to allow someone to sue the owner individually.  Maybe you didn’t keep minutes, maybe you used the company assets like they were your own, or maybe your business was bankrupt from the start.

If you haven’t already done so, consider consulting a lawyer to ensure that you are following proper corporate formalities.  It would be a shame to go to all the work and expense of creating and maintaining a corporation, only to be personally liable because you failed to follow some important step of keeping your corporation and personal lives separate.  A good attorney can help you analyze your own circumstances and help to limit your liability.

MINNEAPOLIS, MN – April 22, 2011. It has been announced that Shawn Vogt Sween has been recognized by Minnesota Lawyer as a 2011 “Up and Coming Attorney.” In its eleventh year, this award identifies those Minnesota attorneys who have distinguished themselves during their first ten years of practice. Criteria for selection include leadership, professional accomplishment and service to the legal community. The 25 honorees were chosen by Minnesota Lawyer‘s editorial staff based on nominations from law firms, legal associations, previous award recipients and other members of the state bar.

This year’s Up & Coming Attorneys will be featured in a special section in Minnesota Lawyer in May and during an awards luncheon on May 11, 2011, in downtown Minneapolis.

Shawn brings her unique experiences and expertise to her one of a kind Minnesota law firm. She has spent time at both the USDA and SBA offices in Washington D.C., where she worked with the national rural development partnership. She now works with clients ranging from farmers to rural business owners.

She’s actively involved in her community and with her local school district. She’s currently serving as an advisor to the local Family, Career & Community Leaders of America (FCCLA) student organization and is also actively involved with the elementary school where she volunteers in classrooms and her community’s upcoming sesquicentennial event planning committee. She lives in Grand Meadow, Minnesota with her husband and four children.

She received her J.D. from Harvard Law School and her B.A. from Hamline University.

ABOUT THE LAW OFFICE OF SHAWN VOGT SWEEN, LLC

The Law Office of Shawn Vogt Sween, LLC, serves farmers, rural businesses, community banks, and rural citizens.  Its main fields of practice involve real estate, estate planning and probate, and business law with an emphasis on agricultural and rural law.  The Law Office of Shawn Vogt Sween, LLC, offers the best of both worlds to Minnesota residents: a Harvard-educated lawyer with a small-town upbringing and a background in agricultural and rural development. For more information, visit www.svslawoffice.com