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How Will The Recent Interest Rate Increase Affect Farmers And Landowners?

Nebraska Landowners

It has long been anticipated that the Federal Reserve would be raising the interest rate in the foreseeable future, and last month it finally actualized. Federal Reserve Chairwoman Janet Yellen announced in December that the interest rate would increase from 0-0.25 percent to 0 .25-0.50 percent. While not a large increase, the raise will still impact a great portion of industries across the US. How will the recent increase affect US farmers, landowners, and the agriculture industry?

First, and most obviously, the hike will increase the cost of borrowing money—something with which most farmers are well acquainted. With the current rate increase, producers borrowing money based on prime would pay 0.25 percent more interest annually on their short-term loans, including operating and vehicle loans.

Secondly, the rate increase will add to the downward pressure on the price of farmland.

Lastly, interest rate increases may also contribute to a stronger US dollar. For those in agriculture, this translates to less competitive commodity prices in the world market.

According to Jeffery Dorfman, an agricultural economist at the University of Georgia, one percentage point rise in the interest rate can translate into as much as a 6 percent drop in commodities prices. On the low end, such a move could push prices down by 2 percent, which translates into “a dime or so per bushel for corn and wheat and maybe a quarter for soybeans,” he says.

While that information is sobering, Dorfman is quick to reassure farmers.

“I would not expect the inevitable increase in interest rates to be positive for commodity prices, but the magnitude of the negative impact should be relatively small and fairly evenly spread across the major row crops.”

With all this in mind, it’s important to take into account that more increases are on the horizon. In September of 2015, Yellen said that the rate will likely rise to 1.5 % by late 2016, 2.5 % in late 2017, and 3.5 % in 2018.

The good news is that the very gradual increases will soften the blow for most producers, depending upon their current financial situation.

What is the best course of action for farmers and landowners in response to rising interest rates? It’s best to continually strive to make improvements in efficiency and productivity, both in the fields and financially. Being able to provide detailed cost projections and yield estimates to your lender will put you in a much better position to negotiate better interest rates.

Creighton University economics professor Ernie Goss has his own suggestion.

“If I were a farmer, I would protect myself against rising short-term rates by locking in these very low long-term rates. I would take out equity on the farm, understanding that I may be using the funds for operating,” Goss said.

Do you have concerns about what the interest rate hike will mean for your farming operation? Feel free to contact us with your concerns. We are glad to work with you to keep your operation running strong.

Source consulted: Anderson, Ken. “The Impact of Higher Interest Rates on Agriculture.” Brownfield Ag News. Brownfield Ag News for America. 03 Nov. 2016. Web. 21 Jan. 2016. Howard, Fran. “How a Rise in Interest Rates Could Affect Farmers.” AgWeb.com. Farm Journal. 05 Aug. 2015. Web. 21 Jan. 2016. Rice, Allison. “If Interest Rates Rise, What Happens to Crop Prices?” Agweb.com. Farm Journal. 15 Dec. 2015. 21 Jan. 2016.

Land Management, Landowners

4 Skills a Professional Farm Manager Must Have in the 21st Century

Key Qualities Land Manager Should Have A successful farm used to be judged by good yields, well-maintained fields and machinery, and timely planting and harvesting. With the burgeoning land and commodity values that characterized the first decade of the 21^st century, coupled with advances in risk management and an often volatile grain market, it is clear that the skills necessary for agriculture success are often the ones that go on behind the scenes. What are the skills that a successful farm manager must possess in 2014 and beyond?

The Purdue University Ag Extension compiled a self-assessment checklist to help farmers and farm managers gauge their efforts on a number of crucial business management fronts. The first area explored deals with production management. Production management is typically described as the hands-on aspect of farm management. Managers who are well-acquainted with the processes of crop production are in a better position to achieve the goal of successful production management: To have a cost of production that is lower than the industry average. With this key aspect in mind, successful farm managers seek to stay on top of the latest technology for their particular operation, know their machinery, and focus on making their farm run efficiently at every stage of production.

The next area is in procurement and selling. Procurement deals with the purchase of needed inputs; selling with the selling and delivery of the product. Smart procurement and selling practices are critical to farm management success, and involve more than simply buying low and selling high. Seeking and getting good marketing advice, where to price products, when and how to deliver, and risks taken to enhance price are all necessary things to take into consideration.

Successful farm managers also need to be mindful of their financial management practices. Financial management involves where funds will be obtained and how they will be used. It is important for farm managers to have a good understanding of the concepts of leverage, interest rates, the rate of return on assets and equity, and the cost of debt and equity capital. Along with this, good financial farm managers also understand and utilize good tax management strategies, as well as the use of insurance to protect against financial losses.

Finally, successful farm managers have a good grasp of the risk management tools available to them. Farming involves a lot of risk; in addition to the price variability of commodities, the farm manager also faces production risks, financial risks, and legal risks as well. To combat them, successful farm managers take advantage of futures price contracts and options, crop insurance, and health, life, and liability insurance. In addition to this, farm managers must have a contingency plan, and be aware of world market trends that are occurring in the industry.

In addition to assessing these skills, it’s also important to re-visit them from time to time, to see if they are being used effectively. If you’re concerned about the proper management of your farm, contact UFARM, and they can help you assess your operation so that you are operating it to its highest potential. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

Source consulted: Boehlje, Michael, Craig Dobbins, and Alan Miller. “Are Your Farm Business Management Skills Ready for the 21^st Century?” Purdue University Dept. of Agriculture Economics. Purdue University Ag Extension. Web. 04 Dec. 2014.

Estate Planning, Landowners

Agricultural Estate Planning Done Right

Agricultural Estate Planning One of the questions we get the most involves estate planning—and for good reason. Estate planning, or the lack there-of, is one of the top issues that many farmers and landowners face. It should go without saying that every farm operation should have a plan in place, because the problems associated with poor planning can not only jeopardize the farm operation itself, but relationships as well. Estate planning doesn’t have to hurt: here are some ways to get it done, and done right.

Why do so many farmers and landowners resist creating a plan in the first place? Some say that the plan is known and agreed upon already by family members, or those engaged in farming. This is a major assumption, and many families have been surprised by what they “knew” and “agreed upon” when the issue finally comes up. Others have a plan drafted, but have failed to re-visit the plan for years, often amidst greatly different laws or circumstances. Yet others assert their plan to simply divide the estate equally among their children. While this sounds easy and fair, it often creates problems among farm and non-farm offspring, and often ends in a farm/land sale.

Obviously, this should be avoided at all costs. One thing that is in general agreement is for the land and assets to provide a living for future generations, and to prosper for the long-run. The main goals of any plan are to:

a) Transfer ownership to the intended party with as few complications as possible.

b) Avoid costly estate taxes, usually done with the help of a land manager, lawyer, and accountant who are well-versed in estate planning.

c) Ensure a secure financial future for the following generation. This often means setting up a plan so that the estate pays for retirement costs, funeral costs, or the costs associated with settling the estate—and not the beneficiaries themselves.

d) Develop the management skills of the estate’s beneficiaries in a way that is agreeable to all parties involved. A properly planned estate will set up an ownership and transfer method that suits the needs and timetable of both generations.

e) Keep the land in agriculture if so desired.

To get started, set your goals—what main things do you want your plan to address? This can range from ensuring a solid retirement, caring for a spouse, to setting up who will take charge of the land and farm after death.

Next, determine your financial worth by verifying both your personal and business assets. This is best done by enlisting the aid of an accountant and a lawyer. They know what information is needed for an accurate assessment of the estate’s worth.

Determine what type of legal ownership and business structure you have already. Are you a sole proprietorship or a limited proprietorship? A Corporation or an LLC? It is necessary to know this before moving forward with your estate plan.

Once you have completed these initial steps, you are now in a position to put a solid estate plan down on paper with your team of consultants. Don’t wait—the costs of putting a plan together are small in comparison with failing to have a plan in place when it is too late.

Do you have questions about your estate plan? Don’t jeopardize your land asset—contact a UFARM representative with concerns—we are glad to help. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

Source consulted: Cowee, Margaret, and Kynda Curtis. “Key Concepts and Steps in Agricultural Estate Planning.” University of Nevada Cooperative Extension. University of Nevada. Web. 24 Nov. 2014.

Land Management, Landowners, Tenants

Land Managers: Helping Both Landowners and Tenants

Land managers help landowners and tenants With volatile grain markets and land values, and with increasing amounts of landowners acquiring land as part of an inheritance, or solely as an investment with very little agriculture experience, many are hiring professional land managers to help them run their farming operations. Even farmers with experience and close ties to the land often turn to land managers to help them negotiate fairly with tenants, or to ask their advice about any number of farming issues—be it the cost of fertilizer or news about the latest farm bill programs.

Despite the overall value that many see in maintaining a relationship with a land manager, there are still pockets of resistance, especially among those who hold the impression that land managers work only for the landowner, and not the tenant who farms the land. Land managers work continually to dispel this myth, and hold their legal fiduciary duty to put their clients’ interests ahead of their own in high regard. This duty applies not only to the landowner, but to the farmer as well.

Resistance to land managers on the part of tenants is something that UFARM managers are familiar with. Their advice to landowners is; if your tenant dislikes the idea of the involvement of a land manager, then you should run, not walk to hire a manager, because something may be amuck. While this may not be the case in every instance, land managers hold their responsibilities to all their clients—be they landowners or tenants—in high regard, and are able to sort out complicated farming situations if the need arises.

Often, this is in helping to negotiate rental agreements between landowners and tenants that are mutually agreeable to each party. In these situations, farm managers are able to act as an impartial third party, and for those who desire it, can keep such relationships at arm’s length. Even in good landlord/tenant relationships, a third party is sought simply to keep the relationship running smoothly, which is often the case when it takes place between family members.

UFARM managers feel like an important liaison with both owners and tenants. Some tenants contact UFARM managers to check fertilizer prices, chemical prices, and new technologies. A qualified land manager holds value for not only the landowner, but can be an important resource for tenants as well.

If you are considering hiring a land manager for your farm, contact UFARM for a free consultation. We are glad to help you determine if our services are right for you. United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

Source consulted: Knutson, Jonathan. “Hiring Expert Help.” Agweek. Agweek.com. 18 Feb. 2013. Web. 03 Nov. 2014.

Farm Bill, Land Management, Landowners, USDA

Latest Farm Bill’s Effects on Landowners

2014 Farm Bill The Agricultural Act of 2014, more familiarly known as the Farm Bill, was finally passed in February, and since then the changes made in the final iteration of the bill are out in the open. Among the most significant changes for farmers and landowners—besides the end to direct payments—are the expanded insurance and revenue protection programs available. In place of DCP and ACRE programs, the new farm bill will offer:

• Price Loss Coverage (PLC), a price protection program that triggers payments when market year average prices fall below target levels, which are called reference prices.

• Agricultural Risk Coverage County (ARC-C), a revenue protection program that triggers payments when the county revenue per acre falls below a benchmark revenue guarantee per acre set for the county.

• Agricultural Risk Coverage Individual (ARC-I), a revenue protection program that triggers payments when there is a revenue-per-acre shortfall on the individual farm that falls below a benchmark revenue guarantee per acre for that farm.

Producers taking advantage of the ARC program will have to choose either the county or farm option. The county option pays up to 85 percent of the base acres, while the farm option is limited to a maximum of 65 percent of base acres.

The PLC option will work much like the previous DCP program. The PLC payment results when the covered commodity’s marketing price falls below the reference price.

While the initial analysis of these new program options seemed a bit more clear-cut last spring, the falling grain prices and bearish markets coupled with the record volume of harvested grains forecasted this fall, the options become a bit muddied. In addition to the current market trend, it’s important for farmers and landowners to understand that whichever program in which they choose to enroll is permanent for the five year span of the bill, and cannot be changed. Therefore, it is critical that they make the best decision based on their specific farm situation.

Landowners also need to be aware that if “push-comes-to-shove” it is really the operator of record for 2014 that will make the decision. With that in mind, landowners should work with their land tenants to arrive at a decision that both parties are comfortable with. A professional land manager can provide valuable assistance to landowners when it comes to negotiating the correct programs for their land.If you are changing tenants for 2015, the former tenants have the authority to make the program decisions, when they really have no stake in the 2015 or beyond crops. This could leave the landowner, or new buyer, of the farm with a program choice they didn’t have input on. The FSA is still determining if there’ll be exceptions made for those types of situations.

Some other specific considerations to be aware of are as follows:

Failure to enroll in 2014 places a farmer automatically in the PLC program beginning in 2015 with no payment eligibility for the 2014 crops
If choosing either PLC or ARC-C, a farmer may enroll in different programs commodity by commodity. As an example on the same FSA farm, the corn base acreage could be enrolled in PLC while soybeans are enrolled in ARC-C
If choosing the ARC-I program all base acres on that FSA farm must be enrolled in the ARC-I program
Base acreage can be reallocated to be in the same proportion as the actual planted crops during the 2009 to 2012 crops. This will be an elective as each farm can stay with the current base, or update.
Those electing PLC can update their FSA yield base to 90% of that farm’s yields from 2008 through 2012. It is likely that most electing PLC will also want to update their yields.

Undoubtedly, farmers and landowners have even more critical decisions to make with the expended program options available with the new Farm Bill. The pressure is on to have the latest information in order to make the right decision. This program details are still evolving and training for FSA staff is going on as this is written. More information will come to light in the weeks ahead.

Do you have questions or concerns about the latest Farm Bill’s affect on your land and how the programs will be applied to your property? Contact a UFARM representative, and they’ll be happy to help make you make an informed decision.

Sources consulted:
Clayton, Chris. “Offering Advice on Farm Bill Choices.” The Progressive Farmer. 12 Oct. 2014. Web. 13 Oct. 2014.
Keeney, Roman. “A Perspective on the 2014 Farm Bill.” Purdue University Center for Commercial Agriculture. Purdue University Ag Econ Dept. 2014. Web. 13 Oct. 2014.

Farmland, Land Management, Landowners

What Value Can A Land Manager Add To My Land Investment?

Meeting with UFARM Land Manager Owning a farm or ranch is an investment with a unique responsibility. As a steward of the land, natural resources are under your control. Your financial contribution as a landowner also has the potential to allow a tenant operator to maintain a farm lifestyle. With land investor participation, farmer operators can rent at least some of the land they farm. Because of the high capital involved in both land and equipment, many young farmers in particular depend upon the availability of rented land.

Arranging leases, supervising tenants, and managing accumulated or inherited farm property is more time consuming than most non-farm residents anticipate. The string of decisions that must be constantly made often poses problems for the absentee owner. A popular solution is to depend upon a qualified land management team to implement a managerial plan to oversee an income-producing operation and to preserve the property’s resources. When selecting a management partner, consider proximity to the managed property, this helps ensure that visits are made to the property on a consistent basis.

Once a management agreement is signed, the land management company prepares an inventory of all assets involved. The land manager goes through a check-in process to itemize specific details of the property. This inventory includes FSA aerial photos, NRCS soil maps, previous crop history, and a complete listing of buildings or structures.

Insurance is reviewed at this time to determine that the site has adequate coverage at the best rate. Property tax valuations are also reviewed, and compared with other properties to determine that the farm is not being unfairly assessed.

A report is prepared which includes recommendations for the land’s best use to meet the landowner’s ownership and investment goals. Rely on your farm manager to do the following for you:

Make recommendations regarding lease options
Locate the best qualified operating personnel
Negotiate and prepare lease agreements
Manage and maintain homes, buildings, and other improvements
Develop a comprehensive operating plan covering crop or grassland rotations, tillage practices, chemical applications, etc., which are beneficial for the long-term value of the property
Supervise crop programs and conservation measures
Manage crop and livestock sales
Advise and oversee capital improvements
Facilitate participation in and compliance with government programs

There are far too many day-to-day responsibilities to itemize, but whatever needs to be done or whenever an opportunity arises, your land manager will work on your behalf. They have the experience and education to manage production inputs and improve margins that will make the operation profitable and sustainable.

Remember to choose a farm management company that lets the landowner choose their level of involvement. As an owner you want to make sure you are kept up-to-date, are informed of decisions made, and are asked for approval when necessary.

When looking for experienced land management, make sure to consult with the professionals at UFARM to help you get the most from your investment. United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact Us.

Landowners, Leases

Leasing Land for Wind Energy Production

Leasing Land for Wind Energy Production Farmers and landowners generally focus on the land beneath their feet. However, with the increasing amount of wind energy development across the Midwest, many are starting to look at the wind above their heads. There are several wind energy farms across Nebraska and they continue to expand in may rural areas. While increasing alternative energy source options is a good goal, farmers and landowners must exercise caution before entering into any lease agreement should a wind farm company approach them about constructing a wind tower on their land.

Before leasing land for wind production, it is of critical importance for a landowner to seek sound legal counsel, preferably with an attorney well acquainted with these types of contracts. Obviously, the contract initially presented is often streamlined so that the project may move forward quickly. Landowners are told that the contract presented is standard and the same as all other wind tower contracts. However, each parcel of land, and each landowner, has a unique set of characteristics and circumstances. It cannot be overstated that each provision is, in fact, negotiable. Once signed, each party has a legal obligation to uphold their part of the contract; as such, it is crucial to make changes before signing the contract.

According to North Dakota State University Extension Farm Manager Specialists Dwight Aakre and Ron Haugen, these are the questions you should ask before signing the dotted line:

How much of my land will be tied up and for how long?

How much will I be paid and how will I receive payments?

Are the proposed payments adequate now and will they be adequate in the future?

Have all liability issues been considered?

Have I considered all contract specifications?

Are there any other considerations?

Under each of these questions is an array of more specific considerations. For instance, what is the duration of the contract? Who is responsible for the access roads, both during construction and maintenance? What about inflation? Will the placement of a wind tower incur more taxes for the landowner? Who is responsible for liability should a problem arise?

Additionally, for farmers, the presence of wind towers on or near their land could affect farming practices due to new maintenance roads, less ability to receive aerial spraying, improvement restrictions, and construction phase damage such as soil compaction.

While these factors, as well as the lure of additional income, are the top concerns of landowners when first approached about wind energy opportunities on their land, there are other very important factors to take into account. Some landowners site noise issues, visual pollution, shadow flicker, and electromagnetic fields that cause interference with electrical devices.

The demand for renewable energy sources is high and wind farms are providing needed economic development in rural areas, so wind energy corporations will continue looking at prime Nebraska real estate to feed the nation’s energy needs. Landowners need to be ready to make leasing decisions that work for them. If you have concerns about leasing decisions for your land, contact UFARM—to lend you a hand.

Source consulted: Aakre, Dwight, and Ron Haugen. “Wind Turbine Lease Considerations for Landowners.” North Dakota State University Agriculture. NDSU. Feb. 2009. Web. 15 Sep. 2014.

Farmland, Landowners

1031 Exchanges Coming to an End?

At some point during any farmer or landowner’s lifetime, they will likely be involved with the sale and acquisition of land. Deferring the capital gains tax on the sale of land to a later date by purchasing more land—in what is known as a 1031 exchange—is a common practice that has been employed for many years. Several proposals by the federal government to significantly alter the 1031 Section of the IRS code have many in the real estate business wondering about the future of 1031 exchanges, and how this might affect multiple industries, including farmers and landowners.

A 1031 exchange is a very useful tool for investors. In technical terms, “A 1031 exchange allows an investor to defer the recognition of capital gains when exchanging one appreciated investment property (the ‘relinquished property’) for another ‘like-kind’ investment property (the ‘replacement property.’)” In most 1031 transactions today, the investor employs a qualified intermediary (QI) to facilitate the sale of the relinquished property to one party and the purchase of a replacement property from another party. The replacement property must be equal to or greater in value to the relinquished property. The capital gains are thus deferred to a later date, when the replacement property is sold or transferred with non-like-kind property.

As such, 1031 exchanges are not tax loopholes; they are merely a deferred payment of taxes. Commercial real estate expert Scott Saunders explains, “The essential logic is that the investor, in exchanging one appreciated property for another like-kind property, has not realized the gain inherent in the relinquished property. The investor has merely changed the form of his investment.” Thus, since no profit is realized in the transaction, there is no premise for taxation.

It is no secret that 1031 exchanges are friendly to investors, businesses and business owners, farmers, and landowners. The advantages of 1031 exchanges are numerous. They make sound business sense, helping investors grow, change locations, diversify and expand, thereby creating jobs, further financial opportunities and economic stimulus to a wide array of other economic sectors.

Consequently, it is troubling to many that the federal government is looking to alter—and in some cases, eliminate—1031 exchanges, in order to increase federal tax income. Two separate proposals, one by former Democratic Senator and current China Ambassador Max Baucus and another by US Rep. Dave Camp (R-MI), would eliminate all 1031 tax exchanges. President Obama’s latest budget proposal would limit the deferred taxes in a 1031 exchange to $1 million dollars per taxpayer per taxable year beginning January 1, 2015.

Of course, should these proposals pass, the effect would not, in fact, produce more federal tax revenue. In reality, the likelihood that investors would simply hold onto properties rather than sell without the ability to defer tax payment through 1031 exchanges would greatly increase. Accordingly, the beneficial economic ripple effects to other financial sectors would lessen as well.

Saunders urges taxpayers and voters to educate legislators on the many benefits that 1031 exchanges offer in order to put a stop to the potential elimination of 1031 exchanges.

Are you looking to sell land, and are wondering about how a 1031 exchange would work for you? Are you concerned about how these potential tax changes might affect you and your land? Contact a UFARM representative with your concerns—they are glad to help.

United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact Us.

Sources consulted: Saunders, Scott. “1031 Exchanges Face Uncertain Future.” Rebusiness Online. 06 May 2014. Web. 02 Sep. 2014.

Farmland, Land Rental Rates, Landowners, Leases

Determining a Fair Price for Farmland Rent

Farmland Rental Lease As we head into the final stretch of August, farmers are already looking ahead to harvest. While they focus on putting pivots to rest in the near future and begin pulling out the harvest equipment, it’s a good idea for farmers and landowners in rental agreements to remember that September 1^st marks the date by which lease agreements must be terminated or terms and conditions changed, if it is so desired by either party.

In Nebraska and most surrounding states, an oral farmland lease begins on March 1^st. Farm lease agreements are automatically continued year by year unless one party serves a termination notice or requests a renegotiation of the terms, and Nebraska law requires that this notice be served six months in advance of that date. Many rental agreements are oral agreements, and while it is always recommended that the terms of leasing agreements be on paper, it’s important for those without one to keep in mind that September 1^st is fast approaching, should one desire to terminate or change a lease agreement. One of the most common disputes among parties with primarily oral farm rental agreements involve differing recollections of the terms of the lease; as such, farm managers strongly encourage that an agreement be put down in writing, even among family members, to avoid such disputes.

With that in mind, farmers and landowners each have an interest in ensuring that rental agreements are fair and mutually beneficial to both parties. Determining a fair price for farmland can be complicated, as many variables come into play, including farmland location, soil quality, land values, crop yields, personal goals, and the relationship between owner and tenant. Naturally, the factors that have the greatest effect on rental price are land values and crop yields. As these vary—sometimes quite a bit—from year to year, it can be difficult for owners and the farmers who rent the farmland to agree on a fair rental price.

To add to this difficulty, it’s interesting to note that a common way of determining a fair rental price—by comparing them with average county rents—isn’t always the best way. Illinois ag economist Gary Schnitkey found that, while the reported state and county land rent averages are accurate, they also mask a lot of variability among rents. From his findings, Schnitkey reports, “Only 35% of farm cash rents are within $20 of the average rent. This leaves many cash rents that vary significantly from averages.”

How then can farmers and landowners best determine a fair rental price for their farmland? Many are turning to professional land managers. Land managers deal with these types of situations on a daily basis, and are knowledgeable about all the tools available—such a flexible lease agreements—to farmers and landowners. They take into account each party’s unique circumstances and work with them to form a mutually agreeable arrangement, that best allocates risk and return for each. In situations involving family members, they are able to serve as an objective liaison who can effectively work out the rental agreement in a fair-minded way.

Are you wondering if your land leasing agreement is serving your best interests? Contact a UFARM land manager—they are happy to offer you sound advice regarding farmland rental agreements.

Sources consulted:

Caldwell, Jeff. “What’s ‘fair’ cash rent for your land?” Agriculture.com. 15 Nov. 2011. Web. 18 Aug. 2014.

Edwards, William. “Computing a Cropland Cash Rental Rate.” Iowa State University Extension and Outreach. May 2014. Web. 18 Aug. 2014.

Estate Planning, Landowners

Should Landowners Consider a Trust During Estate Planning?

Estate Planning for Landowners Among the many decisions farmers and landowners make, the most important deal with estate planning. Unfortunately, estate planning often gets pushed to the back burner, and the wide array of options available to landowners is left unexplored. Being proactive in exploring these options can pave the way for a peaceful estate settlement that retains and passes on the assets in a mutually satisfying way for all involved parties.

Among the many estate planning options available to landowners is a trust. Trusts are an estate management tool that offer landowners flexibility and lots of customizable options. Ironically, the trust is also the least utilized estate management tool.

A trust is an artificial entity, created by means of a legal document, consisting of four basic elements: the trustee, the trust property, the trust document, and the trust beneficiaries. A trust allows a third party to hold assets on behalf of a beneficiary. The trust document specifies the rules of operation for the trust, the powers of the trustee, the beneficiaries to share in the income and principal from the trust, and instructions for distribution of the trust property.

How do you know if a trust is the right option for you and your land? The answer depends on a variety of factors, but as a landowner, you are already a good candidate, as trusts are ideal for those whose assets are largely in land. In addition, a trust might be a good fit for you if you meet one of the following conditions:

1) You want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death. For example, you may want to stipulate that they receive their inheritance in three parts, or upon certain conditions being met, such as graduating from college;

2) You want to support your surviving spouse, but also want to ensure that the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies;

3) You and your spouse want to maximize your estate-tax exemptions;

4) You have a disabled relative whom you would like to provide for without disqualifying him or her from Medicaid or other government assistance.

You may be asking why a trust is that different from a will. One difference is that assets may be gained sooner by beneficiaries, and that estate taxes may be significantly less or avoided altogether, depending upon the type of trust that is set up. Other benefits of establishing a trust include retaining control over your wealth, protecting your legacy, and retaining privacy by avoiding a public probate, saving costs and taxes along the way.

There are many types of trusts, and if you are considering one for your business assets and family, it’s important to discuss your options at length with an experienced attorney and estate planner before setting one up.

You’ve worked hard to get where you are – protect those assets for the next generation. If you are interested in exploring the estate planning options available to you, feel free to contact one of the experienced land managers at UFARM to help guide you.

Sources consulted:

“Estate Planning: Is a Trust Beneficial?” CNN Money. CNN.com. Web. 10 Jul. 2014.

Leibold, Kelvin, and Melissa O’Rourke. “Trusts as an Estate Management Tool.” Iowa State University Extension and Outreach. Iowa State University. May 2014. Web. 10 Jul. 2014.

“What is a Trust?” Fidelity Investments. Fidelity. Web. 10 Jul. 2014.