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  • March 14, 2018

    Forest for the Trees: Remember the Big Picture when Assisting Farm Clients

    Modern farms often consist of many interrelated owners and entities. Bridget Finke discusses the importance of considering the entire farm operation when assisting on a specific project.

    Bridget M. Finke

    corn field

    As the size of farm operations grow, farm ownership structures become more complicated.

    What a client refers to as “the farm” may mean any number of separate business entities and assets with differing ownership. The farm succession plan may involve buy-sell agreements, tenant-in-common agreements, trusts, and estate plans of various asset owners.

    Each change in “the farm” may impact one or more of the various pieces of the overall farm picture.

    Forest or Trees?

    Farm clients tend to be less worried about these “technical” distinctions in ownership – focusing on the farm as a whole – rather than its interrelated parts. Accordingly, a farm client’s apparently simple, discreet project request may really be one of several projects that may need to be completed in order to truly address the issue at hand.

    Bridget Finke Bridget Finke, U.W. 2000, is an attorney and owner of Valley Crossing Law, LLC, in Baldwin. Raised on a dairy farm in Marathon County, she now serves farm families from the Chippewa Valley to the St. Croix Valley with their transactional legal needs.

    Seldom will the client identify the potential impacts on the interrelated pieces. Rather than taking stock of the forest – the entire farm – the client is more likely focused on the one particular tree in front of him or her.

    For example, a client calls and says, “We’re buying the Johnson farm. Can you handle it?” A narrow view of the client’s request is strictly a real estate purchase matter. A more comprehensive view would be to consider how this new acquisition fits in to the overall farm operation, the farm’s existing structure, and the farm’s succession plan.

    A “forest” view would prompt a number of questions or reminders for the client:

    Who is the buyer? It likely shouldn’t be the operating C-corporation that was formed in the 1980s. Will the buyer be mom and dad? Remind them of their revocable trust plan. Or, you may want to check their specific bequests of real estate to the farm children and ask whether the Johnson farm should be added to that list. Should the buyer really be mom and dad?

    Or might this be an ideal time for the next generation to start building equity? Might we instead form a new entity for new real estate acquisitions? If the owner of the real estate isn’t going to be the operating entity, lease terms between the owner and the operating entity should be established, and perhaps rights of first refusal, options to purchase, or other preferential rights should be considered.

    Looking Ahead

    No doubt every lawyer has been accused by a client of turning something simple into something complicated. Posing the follow-up questions above may be interpreted by a client as just that.

    On the other hand, the client may be more frustrated when they need to record a second deed to transfer the new real estate into their trust or when they need to file a gift tax return when they later gift the real estate to their farm children.

    Rather than irritation at unnecessary complications, your client may well appreciate your foresight, your proactiveness, and your interest in their farm and its future.

    This article was originally published on the State Bar of Wisconsin’s Agriculture Law and Rural Practice Blog of the Solo/Small Firm & General Practice Section. Visit the State Bar sections or the Solo/Small Firm & General Practice Section web pages to learn more about the benefits of section membership.

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    Disclaimer: Views presented in blog posts are those of the blog post authors, not necessarily those of the Section or the State Bar of Wisconsin. Due to the rapidly changing nature of law and our reliance on information provided by outside sources, the State Bar of Wisconsin makes no warranty or guarantee concerning the accuracy or completeness of this content.

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