5 Questions You Need to Ask Yourself After Inheriting Farmland
Finding yourself with a farm inheritance is a pretty big deal. Learn the five things you need to ask yourself after inheriting farmland - and what to do next.
The call of wide open spaces can be a sweet sound. Inheriting farmland can sound like that dream calling. Yet, dreaming about owning a farm is different from owning, working and managing one in real life.
Do you want to deal with it?
There's a lot to consider when you inherit land. Will you have the time, energy and money for dealing with a new farm in your life? It's a valid question.
Use these questions about inheriting a farm to help you decide.
Inheriting Farmland: Top 5 Questions to Ask Yourself
You've inherited farmland. Now what? You've got options, and these five questions will help you narrow it down.
1. What Do You Want To Do With It?
What are you going to do with this land? In some cases, the land has sentimental considerations. You're going to need to reconcile with what you actually want to do with the land.
Here are your possibilities.
1. Work It
You can own and work the land. That doesn't mean you have to do it with your own two hands. You can hire people to do the work and profit from the proceeds.
What you farm depends on your land, seasons, and location. Here are some common farming incomes:
- Growing produce
- Selling livestock
- Timbering
- Minerals and mining
- Ranching
- Boarding and stabling
- Horse and dog training
- Animal breeding
You can come up with other creative options, too. Like brewery or distillery production or teaching outdoor courses. If you want to work it, sit down and make a plan.
2. Sell it
The easiest option for profit is to sell the property. You'll pay taxes on the sale and walk away with the proceeds. If you have no sentimental attachment or desire to work the land, this may be the right option for you.
3. Lease it
Did you know you can lease your land to other farmers? They'll pay you for its use. It's a good option if you want to keep the land but don't have time to work it yourself.
2. Are There Other Owners?
Are you inheriting farmland with others? You may only own a part of the land or there may be stipulations for how it's used or sold. This can affect what you do with it.
Check the terms of the estate. Do you need consensus to live there? How about to sell it?
Being a part owner in an inheritance can be stressful and emotional. It's important to be open and honest with the other owners. Seek legal help if agreements aren't fair or seem unclear.
3. Should You Work The Land Yourself?
Are you thinking this is an opportunity to live your lifelong dream of becoming a farmer? That's a huge step! Slow down and consider a few things first.
1. Is the Property Livable?
Many inherited properties are not in the best of shape. They tend to have been in the family for generations. Some are downright unlivable due to rot and mold.
Assess the condition of any structures on your property. Can you live there? How much would it cost to make it liveable?
If the property is unlivable, you could build a new structure. That option will need more time and money. You'll need to plan ahead to make it work.
Consider the location, too. Is it in a place you want to live? How do you feel about the seasons and the weather?
2. What are Your Current Responsibilities?
A farm is a huge commitment. It will be a dramatic change in your life. You may need to leave your current lifestyle behind to make a go of it.
Do you have a job in the city? A family that will move with you? Consider how this new life impacts those responsibilities.
You only have so much time in a day. Consider your current responsibilities and the new ones a farm would add to your life.
Still interested? Then go for it!
3. Will It Provide Enough Income to Live?
You'll need to crunch some numbers. If the farm has been a working farm in the past, there should be some data in the county or the city of its location. If not, you'll need to do some estimating.
A farm is a business so treat it as such.
Write a business plan. Do the appropriate financial documents to see if you can live off the expected profits.
Remember, farming can have rough years due to climate and natural disasters. These are out of your hands. Make sure you have some savings and insurance to cover it.
4. Should You Quit Your Day Job?
Depending on what you choose to farm on your new land, you may have to leave your old job behind. It depends on the workload of your farming commitments. You could hire people to work for you if you'd like to make both commitments work.
4. What About Leasing It?
You've decided you want to keep the property, but you don't have time for farming. You could lease your land. Look into the requirements for your state here.
Leasing is an agreement between you and one or more farmers. Together you'll decide what they can farm and how much you'll get paid for their use of your land.
Some typical arrangements are cash renting and crop shares. Cash renting is renting the land from you. The risk is on the farmer.
Crop shares spread the risk out between you both, but you could profit more from the actual farming.
It's a good idea to have an attorney draw up the contract. This is a legal agreement that all parties need to be clear about.
5. What About Your Legal Requirements and Taxes?
You own the land. You're responsible for following all farming laws, paying taxes, and maintaining proper insurance.
Make sure that you check into any local, state, and federal laws. If you're growing crops or raising animals, there are important regulations to follow. The Environmental Protection Agency, or EPA, is a great place to start.
You'll pay taxes on your land and your profits. Get an accountant to help you pay the right amount and claim any deductions that save you money.
Farms are not without risk and danger. Heavy equipment and accidents can injure people who work there. A good insurance policy protects you and others on your inherited farmland.
You may consider disaster insurance. Losing structures, equipment, produce, or animals kills your farm business for a season. Insurance can help protect your farming investment.
Think About It
You're inheriting farmland, and it's time to make some decisions about what to do next. Use the questions above to guide you as you consider the right move. Whether you work it, lease it or sell it, you'll feel confident in your decision!
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