Preserving the Next Generation

Passing down a family farm to the next generation while maintaining financial stability and ensuring the land's legacy can be one of the most challenging aspects of farm management. Traditionally, selling the entire farm might seem like the only viable option to manage taxes and financial needs, but there are innovative strategies available that allow you to retain partial ownership. One such strategy involves selling a majority stake while maintaining a significant minority share, ensuring both income and heritage are preserved.

The Farmland Stock Exchange offers a unique approach where you can sell 51% of your farm to an established farmer while keeping 49%. This model uses an LLC structure allowing the land owner to still receive income, and providing them with substantial immediate cash flow without the immediate tax implications of a full sale. Here’s how it works:

Ownership Split: You sell 51% to your farmer, who gains control while you retain 49%. This ensures that the farm stays under the stewardship of someone you trust, ideally someone who has already been managing the land.

Income Stream: You continue to benefit from the farm’s productivity through a 33% share of the crop each year, without having to deal with the operational hassles. This income is often more than what you might earn from traditional rental agreements.

Legacy Preservation: The farm stays in the family or community, ensuring that the land continues to be managed by those who understand and respect its value.

Financial Stability: You receive a significant amount of cash upfront, which can be used for retirement, further investments, or personal expenses, all while still enjoying income from the farm.

Tax Strategy: Deferring taxes can significantly enhance your financial planning, reducing the immediate tax burden and potentially passing more wealth to your heirs.

Control and Legacy: Even with a minority share, you maintain an interest in the farm's future. You also have the right of first refusal if the majority owner decides to sell, ensuring the land doesn't fall into undesirable hands.

Community and Family Ties: This model supports keeping farmland within the local community or family, preserving cultural and historical connections to the land.

Choosing the Right Partner: Selecting the right person to buy into your farm is crucial. This should be someone with a proven track record, ideally someone already familiar with your land's management.

Legal and Financial Advice: Engaging with tax advisors, estate planners, and legal experts who understand agricultural law is essential. We can guide you through the complexities of setting up an LLC, but you must get your own financial advisor and accountant. If you do not have one, we have recommendations for both.

Long-term Planning: Consider how this arrangement will fit into your long-term estate planning. How will this impact inheritance? Will your heirs be content with the setup? This is where you will want to bring in an attorney.

Market Conditions: The value of your farm can fluctuate; understanding market trends will help in deciding the timing of such a sale.

The model we’ve created at the Farmland Stock Exchange is a modern solution to an age-old problem in farming: how to transition ownership while preserving one's legacy and financial health. By considering this approach, you can secure your farm's future, maintain a connection to your land, and provide for your family’s future without the harsh tax implications of traditional sales. Remember, the key to success with this strategy lies in detailed planning, and consulting with professionals who understand both agriculture and estate planning.

If this approach intrigues you, reach out for more information or speak with us to explore how this could work for your unique situation. Secure your land, your legacy, and your future today.

In our opinion, we think this $30 Billion number could grow even more over the next 5-10 years. The Farmland Stock Exchange model will allow farmers to control their balance sheets with a higher degree of certainty and be ready to purchase that neighboring farm that may only come for sale once every 50 years.

In this episode of The Land Ledger, Brian Kearney sits down with Mitchell Hora, CEO of Continuum Ag, to explore the transformative potential of regenerative agriculture and 45Z tax credits. Hora, a seventh-generation Iowa farmer, shares insights into his software, TopSoil, which calculates carbon intensity (CI) scores to unlock new financial opportunities for farmers. His company has scored over 340 million bushels of corn, revealing that the average farm achieves significantly better CI scores than the federal default, creating untapped value.

Hora explains that practices like no-till farming and cover crops, often dismissed as unprofitable, can yield substantial economic and environmental benefits when implemented strategically. On his family farm, such methods have tripled soil biological activity, reduced fertilizer use by 50%, and slashed pesticide reliance by 75%.

The discussion highlights 45Z, a biofuel production tax credit offering unprecedented financial incentives for farmers who improve their CI scores. Hora estimates this could add $80-$125 per acre for many farms, doubling profits or moving struggling operations into the black. While policy uncertainties remain, bipartisan support for 45Z signals its potential as a game-changer.

Hora envisions this shift disrupting traditional carbon credit systems, emphasizing how CI scores could serve as a new metric for agriculture’s future. For investors, he underscores the significant opportunities in farmland and ag-tech, driven by market demand for sustainability and profitability.

This episode is a must-listen for farmers, investors, and anyone curious about how agriculture is evolving into a critical solution for global sustainability challenges. Catch the full conversation to learn how innovation and policy are reshaping the agricultural landscape.

Explore the future of farmland investing and regenerative ag today on The Land Ledger!

This newsletter is for informational purposes, and should not be construed as investment, legal, or tax advice.