Farm succession – What you should observe:
A farm transfer takes always place when the owner of a farm hands it over to another person. This might be the sale of the farm to a third party. More often the farm shall be taken over within the family. The leaving party are usually the parents and the successors are the children. The takeover might take place through inheritance or while the parents are still alive. A farm transfer will run smooth if all involved family members, the parents and all siblings, agree about the details of the succession. Unfortunately, the farm succession procedure might lead to disputes. Often there are problems within the family:
The siblings argue, because someone has the feeling to be treated unfair.
There is disagreement about the amount of severance pay.
The parents want that the farm is developing exactly according to their perceptions.
In these cases, it would be helpful if a third impartial person would mediate. Exactly on these occasions I have supported farmers successfully as mediator for quite a while. Due to my support we find common solutions and avoid time consuming trials at court. Thereby the farm transfer is managed to the satisfaction of the entire family and the continuation of the farm secured.
When does a farm transfer take place?
The reasons for a farm transfer may be manifold. Here is an overview about the most important reasons:
• Old age and retirement
Life on a farm is often connected with severe physical work. As it is impossible to continue this stressful work forever, farmers would like to retire at some point. In this case the farmer has enough time to seek advice in order to regulate the farm succession procedure in a smooth way. It is helpful if the siblings know in advance who of them will take over the farm of the parents. Is a suitable successor identified, the farm can be handed over through a donation in several steps to take advantage of tax exemptions that may be used again every ten years. If it should become apparent that none of the children is willing to take over a suitable byer for the farm has to be found.
• Sickness or death
Unfortunately, sickness or death of a farmer can lead to a situation where the farmer is unable to continue the work on the farm. In such a case there has to be a quick reaction as the management of the fields and the care of the animals do not allow for any delays.
• No successor has been found
Disputes with the divergent heirs about the severance payment might even be a lesser problem for some farmers. Many farms face the situation that no successor for the farm can be found that wants to continue the farm work. This might be the case if there are no children that could take over. Or if the children are not interested in inheriting the farm as they do not want to work in agriculture. Then the successor is often found outside of the family, often through the sale of the farm.
What has to be observed during a farm succession procedure?
In a farm transfer process there is a certain legal regulation that has to be observed. You should make sure that the farm can be handed over from one generation to the next to enable a smooth continuation of farm work. The most important regulations:
The general inheritance law
The farm regulation (Höfeordnung). Farm regulations exist in Hamburg, Lower Saxony, North Rhine-Westphalia and Schleswig-Holstein.
The general inheritance law contains decrees about the divestable rights, property and the financial assets of the testator. It regulates the legal succession, the rights of compulsory portion claimants and several other inheritance related topics. The farm regulation contains supplementary rules and regulations that are valid for agriculture and forestry and may differ from the general inheritance law. A particularity of the farm regulation is the specification that farms should be handed over to the heir of the farm undivided to ensure the economical continuation of the farm. Usually the heir is one of the children. The other siblings will receive severance payment. The amount of this payment is calculated from the so-called farm value (Hofswert). First financial conflicts may already develop during this stage of inheritance. If the farm is sold before 20 years after inheritance are gone or a part of the acreage is no longer used for agricultural purposes, the divergent heirs have a chance for a subsequent severance payment. Therefore, the issue of company succession in agriculture requires a different knowledge and consulting than in general inheritance law.
This is part of farm inheritance:
Farm succession requires a thorough preparation and a systematic organization. Therefore, participation in an inheritance consulting workshop of the local office of the chamber of agriculture is highly recommended. I recommend four steps of the farm succession procedure:
1. Declaration of willingness
2. Search for a successor
3. Training period
1. Declaration of willingness
To hand over a farm is no easy task. There is an emotional bond to many aspects of the farm and the farm has often been for generations in the family. On top of that it is difficult for many farm owners to retire. Here the willingness to really hand over the responsibility is of utmost importance. Resignations from the resignation just complicate everything.
2. Search for a successor
As sad as it is a farm transfer does not ever run as smoothly as requested. The generation that is handing over the responsibility would like one of their own children to be the successor. Then everything would stay in the family. This issue can usually be figured out on time as the transfer should be combined with a thorough training period. If there is no daughter, son or other close relative ready to take over the farm is usually sold to a third party. Therefore, a farm transfer contract will be signed with the new owner. This contract shall ensure that the farm is not neglected after the sale and might contain conditions for the continuation of the farm that shall secure the ongoing existence. The contract might contain as well the duty to care for the retired farmer or a permanent right of residence etc. A farm transfer contract has to be notarized to make it legally effective.
3. Training period
The retiring owner and the new owner of the farm hand the farm over slowly and work together on the farm. According to education, practical experience and knowledge about agriculture this transition period may be shorter or longer.
The issue of farm transfer is finished. The new owner is able to go on at the farm on his own. The retiring owner can withdraw himself from the responsibility for the farm.
How a farm transfer procedure will develop:
A farm transfer is an emotional issue for many families. If common solutions are found within the family everything is fine. But if conflicts occur there is a high risk of legal disputes. To avoid those a mediator might be included in the transfer procedure. Disputes between the new owner and the divergent heirs might result in a final break between siblings. The amount of severance payment might serve as an arena to fight about old offenses that have nothing to do with the farm succession as such. Such disputes are very problematic and might mean the end for the farm. The approach of my mediation is to develop the farm transfer procedure in a way that all parties are satisfied with the result and that the successful continuation of the farm is possible. Therefore, I work as an impartial mediator to harmonize your various interests. I would love to assist you in solving your farm succession conflict in a constructive and consensual way and to develop a common concept for the future of your farm.
Make an appointment for a first free preliminary, now to get to know each other and figure out, if a mediation is a useful option in your case under the phone number 0049 – 511 – 56 96 41 98