Whether it’s news to you or part of farm succession planning you were aware of, inheriting a family farm—and perhaps a working farm operation—comes with many responsibilities and choices.
You’ll want to explore whether you have the desire and skills to learn farm management, the state of the farm’s value and profitability, and the level of emotional investment in the land.
It can be a challenge to make big life decisions when you may also be grieving, so let’s walk through some potential outcomes for a farmland inheritance together.
What Can You Do With Inherited Farmland?
The question of what to do with inherited farmland has more possible answers than you may have considered. On the basis that you are a qualified heir, you could:
#1: Sell the Land
If you’re not cut out to be a farmer, have no interest in being a landlord, or inherit agricultural land far from your home, you can always sell it. The process isn’t as cut and dried as selling an inherited house, however.
Depending on the state of the land and its buildings, you may be selling a combination of a homestead, a working business, and development land. You’ll need a specialized farm appraiser and real estate agent to determine the land value and move forward. Keep in mind that if you inherited land ownership through a will, the land value may be subject to an estate tax. For information on how to avoid capital gain, estate taxes, and inheritance taxes, check out the Farm Bureau Financial Services website.
#2: Keep and Farm the Land
If you’re inheriting a house with a farm that you’ve been working on as a family member, and you’re already living your dream, then keeping it going could be the primary goal of your farm inheritance planning. Here, shifting from an employee mindset to farm owner means you need to take on the mantle of responsibility for strategic decisions about how to make and keep the business profitable.
You’ll want to work with a professional to deal with current tax liability and other financial implications of the farm transfer.
#3: Live in the Household but Lease the Farmland
Love the idyllic country lifestyle but have no interest in waking before the rooster crows? You could take possession of the farmhouse and work with one or more farmers to utilize the land by having them lease it from you.
#4: Rent the Household and Lease the Farmland
If you have no interest in either living on or working the land, but aren’t ready to sell, you can act as a landlord and lessor. The household area can be rented out either individually or in combination with the leasing of the farmland.
#5: Live in the Household and Repurpose the Farmland
Another way to combine staying in the country while changing up how the farmland creates income is to repurpose how the land is used. Consider:
- Farming fresh crops and/or livestock – Not happy with corn and barley? Consider a switch to cattle ranching or livestock breeding—or vice versa.
- Working with horses or dogs – If you’re not interested in farming animals, consider boarding and/or training horses or dogs.
- Using natural resources – If your land contains timber, minerals, or other valuable natural resources, explore what processes or partners could be tapped to profit from them.
- Building retreat rentals – While this may be an ideal fit if your inherited land is near a state park or other attractions, rental space designed for individual and group retreats could also promote the lack of distractions as a benefit.
Writers’ and artists’ retreats, spiritual or meditative weekends, and even technology-break family getaways could all make use of calm, simple accommodations, perhaps alongside a walking maze and a shared studio space.
- Creating a destination – If your farm is within driving distance of a large enough population, think big. Some or all of the land could be home to your state’s most elaborate haunted house and corn maze, a farmer’s market with a farm-to-table eatery, an antiques and flea market space, a go-kart track, a llama ranch alongside a spinnery and fiber art gallery—the list of possibilities is endless.
If you have a dream that can be combined with the space and environment you’ve inherited, it’s time to brainstorm and crunch the numbers.
How is Farmland Valued?
Determining the market value of agricultural property is complex; you’ll need a specialized appraiser. They’ll consider:
- Productivity growth based on past years’ yields
- Relevant commodity prices and trends
- Current influence of U.S. economy, government policies, and local land use planning
- Debt load of the farm property and business
- Farmhouse, barns, and other buildings’ conditions and features
- Farm assets, such as tractors
- Presence of timber, minerals, or other resources
You can find a certified appraiser through the American Society of Farm Managers & Rural Appraisers.
Benefits of Keeping the Farmland
Retaining farmland ownership can provide several benefits. You could gain a:
- Source of income through any combination of farming, equity, and leasing
- Stable and healthy family environment
- Back-to-nature way of life
- Career with no commute, no cubicles, and walls, no suit and tie
Benefits of Selling the Farmland
Looking for a fresh start? Selling your farm may provide:
- A simpler way to split a shared inheritance if you’re a co-heir
- Freedom from a business at the whims of regulations, weather, and variable yields
- Escape from physically taxing, potentially dangerous work
- Money to invest
Use Your Inheritance as a Source of Cash with EasyKnock
If you want to fund new dreams without letting go of the family farm, you can now do both.
EasyKnock provides property owners with a way to convert their equity to cash without taking out a new mortgage through Farmland Finder, our sale-leaseback solution for farmland. You can bypass the mortgage and loan process roadblocks, particularly for those historically underserved by traditional lenders.
If you’d like to learn more about how your new property can stay in the family while providing you with cash funding, contact EasyKnock today.
Tillable. What To Do With Inherited Farmland. https://tillable.com/blog/so-you-inherited-farmland-now-what/
Iowa State University Extension and Outreach Ag Decision Maker. Getting Started in Farming: Inheriting a Farm. https://www.extension.iastate.edu/agdm/wholefarm/html/c4-07.html