Peace of mind is a critical aspect of farming – knowing who is next in line for the farm is a critical aspect of mental health. Veronica McClendon, principal attorney with McClendon Law and Consulting, said physical health is often addressed but mental health is also an integral part of overall well-being.

“Farmers derive their livelihood from working the land and they’re business owners,” she said. “When farmers don’t have legal affairs in order in regard to the land to provide to the business they’re running, it’s hard to have peace of mind because so much is on the line.”

One situation that may lead to serious disagreements and family strife is heirs’ property. McClendon explained the concept of heirs’ property as “property that’s passed down from one generation to the next in a way that results in an increasing number of people owning the same piece of property.” Property owners are most often family, but in some cases, people who are not directly family members may be involved.

“Heirs’ property can be created by wills or intestate succession, and it results from the failure to document the transfer of legal title when the owner passes away,” said McClendon. “The number of owners grows over time.”

She illustrated the concept with an example of someone who purchases 100 acres, lives on it and adopts farming as a way of living. The farmer passes away without a will and has three children. “Each of the three children inherits an interest in [that] property,” she said. “As each child passes away, their heirs become part owners of the property.” The children of those children eventually have interest and ownership in the same piece of property, and as time goes on and more people (grandchildren, great-grandchildren) gain ownership, ownership becomes complicated.

Significant problems can result if the property owners don’t have a clear, marketable title. “We see this as a major issue with farmers who derive their livelihood from their land,” said McClendon. “Farmer Joe inherited some land from his father who inherited land from his grandfather. As far as Farmer Joe knows, he owns the land because his dad farmed it, his grandfather farmed it and they told him he’d be the one to farm it. But he didn’t know or didn’t pay attention to the fact that no legal transfer of the property was done.” In this case, Farmer Joe inherited the property, but he also inherited it along with cousins, siblings and other relatives. Although Farmer Joe is living on the property, is farming it and making a living, he may not have a clear, marketable title because he inherited it along with other relatives.

“Another issue is that co-owners have equal rights to use the entire property,” she said, noting that this doesn’t occur as often as it could. “A family member will decide they want to use the property in a way that’s inconsistent with the person who’s been using it primarily in the past. Farmer Joe may farm the land and derive income from the farm, but Cousin Sue decides she wants to farm the land – she has equal rights to do so even though she hasn’t been doing anything on the property over the past several years. She’s still an heir, a co-owner, and can come in and use the property suitable for her.”

Not having a clear, marketable title can create problems if the farmer attempts to obtain a loan. “It’s harder to access USDA programs,” said McClendon, adding that USDA has taken steps to help heirs’ property owners access programs. “However, there are still some legal hoops to jump through to qualify, and sometimes property owners aren’t aware of those additional legal steps and may not have the resources.”

Heirs’ properties typically do not have clear titles, so McClendon urged farmers with heirs’ property to first clear the title. “Multiple people own the property or a partial interest in the property, but their names are nowhere to be found in land records for that property,” she said. “There’s incomplete legal work done after the original property owner died and no one went to probate court to have the estate administered. Or it could be that they had a will done and someone went to probate court and filed the will but didn’t do anything else.”

Having a clear title means owners can be identified by a third party. “When you go to land records for the county where the land is located, you can see who owns a property,” said McClendon. “It also means there are no ownership claims against the property by other parties.” The owners listed in county property records should match the actual property owners.

After clearing a title, consolidate it to reduce the number of people who are record title owners to the property, which can be done in several ways, such as transfer to one or two owners through sale or as a gift. In some cases, family members will turn things over to one member to continue the farm; in other cases, family members want their fair share in a buyout. With title transfers, McClendon reminded farmers to consider the potential for long-term care.

“Transferring property into or out of your name can impact eligibility for financial assistance for long-term care,” she said. “Make sure to plan in a way that allows you to pay for long-term care needs while protecting land and other assets to keep those assets in place.” She suggested working with an attorney who understands wills, trusts and farm transition planning.

Next, if the property is not in farming, convert it to profitable use and make the land pay for itself. “You might want to contact [the local] USDA office for technical or financial assistance programs to make the land income-producing,” said McClendon. “Consider hiring a land consultant, someone who’s well-versed in forestry and timber management, or someone who can help think of agritourism ideas. Make sure the farm is as profitable as it can be.”

Finally, create a succession plan that will allow a seamless transition of property from one generation to the next. McClendon encouraged families to obtain legal advice to deal with the paperwork involved. Everyone should understand the legacy at stake, what they will receive in the future and what it takes to get it. She urged families to keep one another involved throughout the process because as land is being transferred, family history is also being transferred. Technical skills and farm and land management should be passed on to the next generation.

“Be creative and be competitive,” said McClendon. “When you’re planning for your land, there is no one-size-fits-all. Every family is different, land is different, your vision for the property is different. Come up with a strategy that fits your family situation.”

by Sally Colby