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Farm succession planning

Surprisingly few farmers, ranchers and foresters have a retirement plan. Only 27% of farmers have succession plans in place to transfer their farmland and farm business to the next generation, according to Katie Cavanagh, a fifth-generation farmer and Farm Succession Planning Program leader. Sound retirement and estate plans are critical to leaving a viable farm legacy. Many farmers want to keep their land in agriculture but need their land’s equity to support their retirement years.

A Farm Succession Planning Workshop, held at Sweet Berry Farm in Middletown, RI, addressed concerns for farmers, ranchers and forest/open space landowners. A panel of professionals explained many legal tools available for retirees and family members. Sponsors, Chuck Allott of Aquidneck Land Trust and Rupert Friday of the RI Land Trust Council welcomed attendees.

Cavanagh described her family’s 3-year transition process. She stressed the importance of planning for farm succession and involving all family members - siblings, children and anyone with a stake. Cavanaugh described their three-year process and the benefits of bringing in outside mediators.

Conservation Easements

Stephen Haire of Moore, Virgadamo & Lynch, Ltd., stressed that “farmers should first determine their plan of action. Then seek the right tools to make that happen.” He described the potential benefits of Conservation Easements or selling development rights in retirement and estate planning. Easements should have enough flexibility for future farmers to maintain a viable business.

Conservation easements will reduce land value on signing and estate taxes upon death. Farmers can borrow less money against this smaller asset. In most states, property taxes are lower on land with easements.

Conservation easements may cover all or a portion of a farm. Some farmers retain the right for family members to build a home or sell future house lots. Other farmers retain rights to build agricultural buildings for feed or equipment storage, livestock, value-added processing, retail farm stand, restaurant or agritourism.

The farmer may sell a Conservation Easement at full market value. If they sell for a smaller amount, this is called a Bargain Sale. This difference may be a charitable donation when the easement goes to a qualified non-profit organization such as a land trust and eligible for a tax deduction.

Farmers should consider all needs of future farmers. Conservation Easements last forever and are very difficult to amend unless the change clearly enhances the conservation values. The easement holder is required to enforce the easement restrictions on future generations.

Cavanagh said a Conservation Easement allowed her to buy out her uncles’ and siblings’ stake in her parent’s farm. This eased their concerns that she might “retire from farming at 65 and sell the farm to developers for big bucks.”


Attorney, Holly Janney of Janney and Associates, Ltd., described the benefits of Limited Liability Corporations (LLCs) for transitioning businesses and farmland to new generations, providing retirement income and for estate planning. “LLCs are the glue that holds together fractional interests in land or a farm business.” LLC documents have restrictions on transferring their shares. An LLC may also help to protect the farm or business in the event of a lawsuit or a divorce in the family.


If a farm business, land and/or LLC shares are left to heirs, the federal and state governments may impose an estate tax if the value of the bequest exceeds approximately $925,000 for Rhode Island purposes and $5, 340,000 for federal estate tax purposes. State thresholds vary.


Farmers may gift LLC shares, land or other assets during their lifetime instead of after death. The asset basis does not change when gifted during giver’s lifetime. Assets purchased decades ago remain at that value plus improvements. If new owners sell, they have to pay tax on ALL the gains made during their ownership – and any gains under the previous owner(s). This tax burden is often more than paying estate tax upon death.

Generation-Skipping Trust

When estates pass to successive generations, federal and state estate taxes are imposed upon each generation. If the assets are left in trust for children, they can be excluded from the child’s estate upon his or her death, thus passing to grandchildren free of estate taxation. The child can have a “limited power of appointment” which would allow them to change the form of the ultimate gift to grandchildren as needs may change, or leave assets in trust for the child’s spouse’s life, with the remainder passing to the grandchildren.

Retirement Income

Jon Jaffe of Farm Credit East explained financial strategies for retirement and estate planning considerations.

Farmers should develop a retirement budget including their savings. Evaluate if the farm business generates enough income to support the retiring farmer(s) as well as the next generation.

Selling a farm to children or non-family farmers may generate enough for retirees. Farmers may sell at a discount with affordable installment payments. Retirees may receive less cash up front and lower tax liability. Future payments will often be taxed at lower tax brackets. Families with multiple children often sell or leave the land to one child and offer or leave cash and investments to other children.

Farms can be more viable when sold at a reduced price with a consulting contract. Retirees collect income and advise new owners during their transition years.

Jaffe stressed that farmers must consider the skills of potential farmers. Do children have what it takes to run a successful business? Farmers must teach their children to raise crops and/or livestock, to process and sell value-added products, maintenance skills as well as how to manage a business.


Tonya Harris, Executive Director, and Loraine Della Porta, board member of the Center for Mediation & Collaboration RI described their experiences facilitating family transition discussions. Impartial mediators facilitate communication and resolve conflicts to ensure fun holiday gatherings not torture.

Mediators learn about concerns, interests and priorities of all interested parties. Mediators work to build trust and facilitate productive communication. Sometimes this means helping farm partners develop clear, on-farm job descriptions and well-defined roles for family members. Farmers may need a weekly farm meeting. Jaffe said some parents must be told to “back off” and allow the next generation a 2-year trial period. There may be a buy back contract if things go badly.

36 states, including RI have mediation programs certified by the USDA. The USDA provides matching grant funds to the mediation programs to support mediation of a variety of issues, including farm credit and transition issues. When there are fees, all mediation participants share the fees so everyone has invested in the process. If a participant is cash poor, they help in other ways, i.e. bringing food or hosting family meetings.

Planning Timeframe

Putting together a complete farm transition plan may take a few week or several years. Mediation helps smooth this process. It may take four to five family meetings over 6 - 18 months to reach a consensus.

Learn More

Learn more about all these retirement and estate planning options from a qualified local professional. Contact the organizers and workshop speakers:

  • Chuck Allott, Executive Director of Aquidneck Land Trust - or call 401- 849-2799 ext. 12.
  • Rupert Friday, Director of the RI Land Trust Council - or call 401-932-4667.
  • Katie Cavanagh, 5th-generation farmer and former Director of the Southeastern Massachusetts Agricultural Partnership (SEMAP) Farm Succession Planning Program - or call 508-584-6528
  • Holly Janney, estate attorney, at Janney and Associates, Ltd. - or call 401-423-3653.
  • Stephen Haire, attorney at Moore, Virgadamo & Lynch, Ltd. - or call 401-846-0120.
  • Jon Jaffe, VP/Farm Business Consultant, of Farm Credit East - or call 860-779-5420 ext 8341.
  • Tonya Harris, Executive Director of the Community Mediation Center of Rhode Island - or call 401-273-9999.

This Farm Succession Workshop was sponsored by Aquidneck Land Trust, RI Land Trust Council, RI Conservation and Development Area Council (RI RC&D), RI Forest Conservator’s Organization (RIFCO) and RI Conservation Districts, URI Cooperative Extension and Sweet Berry Farm.

A similar story ran in the May 19, 2014 New England edition of Country Folks.

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