Farmers getting older, but lack plan for land

BEND, Ore. – There are two things Fields Farm owner Jim Fields would like to see happen over the next 20 to 30 years.

Fields, 57, wants to make sure he and his wife, Debbie, can retire happily and still leave something behind for their children. And he wants to make sure his Bend property continues to be a fully functioning farm.

“When you’re a farmer, you don’t just do things for yourself; you do them for the future,” he said.

Having a plan for his farm puts Fields in a clear minority. A 2010 study sponsored by the U.S. Department of Agriculture found that less than 40 percent of the country’s farmers have a plan for the future of their land.

This raises concern among those in Oregon’s agricultural industry. Another USDA report found the state’s average farm or ranch owner was 57.5 years old, and more than a fourth of them were already at retirement age.

“More and more people are approaching an age where they’ve got to make a decision about the future of their farm,” said Bart Eleveld, an economist with Oregon State University’s Extension Service who specializes in farm management.

Failure to have an adequate succession plan when the farm owner dies can cause a tremendous headache for the family, he said. It can even put the farm’s existence in jeopardy.

In 2010, the USDA teamed with researchers from Vermont, New Hampshire and Wisconsin to conduct a national survey on the future of farms, known as The FarmLASTS Project.

One of the topics covered was farm succession – the process of figuring out who takes over when a farmer dies or can no longer handle day-to-day operations. The project’s authors thought farm succession was of particular importance because of studies suggesting only one-fifth of the country’s family-run farms are successfully passed from one generation to the next.

“I don’t think any of my three children want to be farmers,” Fields said. “The risk/reward and the labor/income ratios aren’t enough for them, so they want to do something else.”

But the FARMLasts project identified another major issue that could complicate a family farm’s transition: lack of planning. According to the report, only 36 percent of the country’s farm owners had an estate plan to dictate what would happen to their property after they died, 18 percent of them had planned an exit strategy from farming, and only 12 percent had planned for retirement.

Eleveld, of OSU’s Extension Service, said not having a plan in place can threaten a farm’s existence. Depending on a farm’s size and value, the property owners could be forced to pay federal estate taxes of at least 30 percent when it is transferred to the next generation. The farm’s owners may have to pay state inheritance or estate taxes as well, he said.

Farm families could be forced to sell their entire operation if they cannot afford to pay these taxes, Eleveld said, cautioning this could be a lot harder than one might expect. While there are lots of people interested in becoming farmers, few of them have the capital needed to buy land.

“It’s silly to go out and buy land,” he said. “To expect a working farm to pay for that cash flow is kind of unrealistic.”

But people can avoid this situation through proper planning, Eleveld said, such as gifting land to various individuals or placing it into trusts so that its total value falls below estate tax thresholds.

Fields said his farm plan still needs work, but so far he and his wife are happy with the conceptual outline they’ve drawn to dictate the future of Fields Farm. He plans to divide the land so its most productive three acres – which are closest to his house – can be placed into a farmland trust and the rest of the property can be sold to help pay for his retirement.

He hopes to continue working the farm for another five to 10 years before he transfers operations to someone he trusts who is both willing and able to manage the farm.