Planning for the future of your family farm can feel like a big undertaking, but taking it one step at a time makes it easier to manage. Your plan will look different from anyone else’s; it depends on your family, your goals, and the assets involved.

One of the best places to start is by building the right team. At a minimum, that means working with an attorney, tax professional, financial advisor, and insurance agent. Equally important is maintaining open communication among your advisors, family members, and especially your heirs. That collaboration is what ensures the plan works for everyone. Below are a few key areas to keep in mind as you create or update your farm succession plan.

How can farm equipment be transferred in succession planning?

As operations transition, equipment is often the first asset to address. Rising costs of machinery make it especially important in 2025 to be intentional about how this transfer occurs. Several common options include:

• Outright purchase: The successor purchases the equipment, either through an installment sale or a lump sum.
• Trade approach: As equipment is traded, the successor pays the boot (trade difference). Ownership of the new piece is determined by the trade value and the boot paid.
• Lease arrangement: The successor leases the equipment, often with an option to buy at the end of the term.
• Gifting: The predecessor gifts the equipment to the successor.

Each option carries different tax and cash flow implications, so it’s critical to review them with your tax advisor before deciding.

What are the options for transitioning farmland to the next generation?

Real estate remains the largest and most sensitive asset on most farm balance sheets. In the last decade with land values at historic highs, planning is more important than ever, especially when balancing on-farm and off-farm heirs.

Common approaches include:

• Parcel approach: Each heir receives a parcel of land. While simple, this can create tension if the parcels differ in quality or if off-farm heirs sell or lease their land.
• Equal share approach: Land is deeded into an LLC during the predecessor’s lifetime. Rent is paid to the LLC, and upon inheritance, ownership is split among heirs. This structure can preserve the land base and may offer estate tax benefits.
• Asset swap approach: Off-farm heirs receive non-farm assets (e.g., life insurance, retirement accounts, rental properties), while on-farm heirs receive the farm real estate.
• Gifting approach: Real estate is gifted during the predecessor’s lifetime. This may make sense in situations with potential estate tax exposure or when the first generation does not need the land for retirement income.

Cash Flow & Transition Timeline

The two most important factors in any transition are cash flow and timing. A full transfer in one year is rarely practical. The successor may not have the capital to absorb all the risk at once, and the predecessor could face large tax liabilities.

Gradual transitions allow:

• The successor to spread out capital needs.
• The predecessor to manage tax exposure.
• Both parties to balance retirement income and ongoing operating expenses.

This balancing act is where your advisory team plays a crucial role, helping structure the plan so it is financially sustainable for both generations.

Moving Forward

Succession planning is not a one-time task. Tax laws, asset values, and family circumstances all evolve, and your plan should too. Starting early and reviewing your strategy regularly will protect your farm’s legacy and give everyone peace of mind.

At Lutz, our ag-focused advisors can help you evaluate your options, align the financial and tax implications, and create a clear plan that supports both your operation and your family’s long-term goals. Contact us to learn more.

• Achiever, Learner, Individualization, Arranger, Relator

Tyler Hohenstein

Tax Manager

Tyler Hohenstein, Tax Manager, began his career in 2014. He has developed extensive expertise in tax and client relations while also assisting with staff training and development through his leadership on the Grand Island office’s internship program.

 

Specializing in tax consulting and compliance, Tyler focuses on industries such as agribusiness, construction, real estate, and vehicle dealerships. He takes pride in seeing his clients succeed and grow, providing comprehensive solutions that address their unique challenges. His thoughtful approach to problem-solving helps him create practical strategies for complex tax matters.

 

Tyler lives in Palmer, Nebraska, with his wife Kara and their cat Louie. Outside the office, he can be found playing golf, working cattle, and smoking meat. Tyler also occasionally assists his veterinarian wife as a vet assistant.

308.385.1134

thohenstein@lutz.us

• Analytical, Achiever, Context, Competition, Learner

Ryan McGregor

Consulting Director

Ryan McGregor, Consulting Director at Lutz M&A, began his career in 2012. With a diverse background in banking and finance, he has developed extensive expertise in business valuation, mergers and acquisitions, and exit planning. 

Specializing in succession planning and valuations, Ryan focuses on helping clients across various industries including agribusiness, construction, healthcare, and manufacturing. He conducts in-depth market analysis and prepares comprehensive valuation reports for purposes ranging from gift and estate planning to Small Business Administration (SBA) qualified opinions. Ryan values building relationships with clients and finds satisfaction in seeing them successfully transition their businesses through well-crafted succession plans. 

 

At Lutz, Ryan has demonstrated his commitment to professional expertise, earning multiple designations including Certified Exit Planning Advisor (CEPA), Certified Valuation Analyst (CVA), and Certified Mergers & Acquisition Advisor (CM&AA). His analytical approach and drive for continuous learning enable him to provide innovative solutions tailored to each client's unique needs. 

 

Ryan lives in Omaha, NE, with his wife Beth and their three children. He enjoys spending time with his large family and is an avid golfer and sports fan. 

402.778.7946

rmcgregor@lutz.us

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