HVADC Involvement: Orange County Farmland Succession Planning Workshop

Farmland and ranch succession is a complex and emotional topic. Thankfully the Hudson Valley is full of talented Business Technical Assistance providers and programs and tools to make the life-changing process go as smoothly as possible.  

On January 19, Hudson Valley AgriBusiness Development Corporation (HVADC) hosted the Orange County Farmland Succession Planning Workshop. Presented by HVADC, American Farmland Trust (AFT), and Cornell Cooperative Extension Orange County, the virtual event, which was recorded and can be viewed online now, was attended by leadership from agricultural organizations and service providers who outlined the key components to succession planning and how best to begin planning.  

“Succession is a critical area of concern for the Hudson Valley,” HVADC Deputy Director Mary Ann Johnson said to kick off the workshop. “For farmers, their families and future farmers who may or may not be in your family, we know these are not easy decisions and we know it takes time to work through them.”  

The workshop was designed to help farmers get started on thinking about the process and to provide resources to make the process easier. Those offering their institutional expertise included: Maire Ulrich, CCE Orange County Agriculture Programs Leader; Molly Johnston-Heck, AFT Regional Farmland for a New Generation Manager; Jeffrey Fetter, President at Scolaro Fetter Grizanti & McGough, P.C (and Chairman of the firm’s Agricultural Services Group); Jeremy Schneider, Orange County Land Trust Outreach and Programs Coordinator; Jerry Cosgrove, AFT Farm Legacy Director and Senior Advisor; and Jack Hornickel, Staff Attorney, Food and Beverage Law Clinic, Elisabeth Haub School of Law, Pace University.  

Presentations by the group covered a comprehensive outline of the estate and business transfer planning process. The two hour recording and accompanying supplemental documents produced for the workshop provide vital guidance and resources that every farmer and rancher needs to know whether they are nearing retirement or just getting started.   “Regardless of whether your [transfer] plan is simple or complex, involves merely a will or sophisticated agreement among family and nonfamily members - the most important part is to get it in writing,” Jeffery Fetter said in his preamble. “Having your plan in writing helps to avoid disputes, confusion, tension, deterioration of the farm, and the time and expense of having to end up in court.”  

Fetter explained that farm and ranch owners require one coordinated comprehensive plan. This plan needs to include: Estate, Retirement and Financial Planning, Asset Protection, Long Term Care Planning, a Buy Sell Agreement, and Management Succession.   That’s a lot, and it is understandable for anyone to feel overwhelmed. Luckily no farmer needs to take on this task alone. Organizations like HVADC and CCE Orange County are available to connect farmers and ranchers with Business Technical Assistance advisors that have years of experience navigating the process.  

Unique programs that farmers may not be aware of are also available to lift some of the burden of transition planning. Jerry Cosgrove, AFT Farm Legacy Director, presented on the topic of Conservation Easements and explained how they provide advantageous legal avenues and can be integrated into farm succession transfer and estate planning strategies. An easement can help to insure that a farmer’s legacy of hard work continues to impact and help the next generation. Land protection options, like agricultural conservation easements, can often be integrated into farm succession transfer and estate planning. Conservation options can help ensure land remains in agriculture, generates income for retirement, and allows owners to avoid or reduce certain taxes - including capital gains, gift, and estate taxes.  

Technically, conservation easements are deed restrictions that landowners voluntarily place on their property to prohibit certain kinds of development. Legally, agricultural easements are a form of conservation easement, but because their purpose is to keep the land available for farming, most agricultural easements are structured with far more flexibility than standard conservation easements. In general, agricultural easements limit subdivisions and land uses that are incompatible with farming, but allow for new farm buildings that support operations, including housing for the farm family.    

Landowners can sell or donate an agricultural conservation easement to a qualified conservation organization or government body. The value of an agricultural easement is generally the fair market value of the property without an easement, minus its restricted value with an easement, as determined by a qualified appraiser. Finding an appraiser who is experienced with conservation easements is critical.  

Agricultural easements are intended to limit land uses inconsistent with productive agriculture and to provide maximum flexibility for agricultural operations now and in the future. With a lifetime sale or donation, such easements can be integrated into estate planning or incorporated into a will or trust.  Agricultural easements can often be a useful first step towards addressing succession, transfer and estate planning.  

A thorough and thoughtful discussion of agricultural easements raises critical issues that a family may not have yet addressed with each other, like what impact future business changes could have on the land or what type of site planning is necessary to allow for future flexibility. There are also significant tax implications associated with transferring, selling or gifting a large property. Conservation can go a long way to ease the financial impact of that process.   Additionally, the sale of an agricultural easement can generate cash proceeds to buy out business partners or other family members as needed. Easements can help treat heirs fairly, as they can receive the land but not the development value, which can be more nebulous and uncertain.   

By preventing non-agricultural development on the property, agricultural easements can also help make the land more affordable for the next generation to purchase. So if there is no successor in the family, a farmer or rancher can be reassured that they are giving a young farmer an easier road towards attaining their dream.    

Also, when easements are sold, the proceeds can be used to improve farm and ranch business viability right away, before transition or succession takes place. Or, the sale of an agricultural easement can provide funds for retirement without having to sell the land outright.  

In circumstances where a farm or ranch owner has no successor or heir but still wants to ensure that their land stays in agricultural production, there are additional options. They may choose to donate the farm or ranch to a nonprofit conservation organization, such as AFT, allowing the organization to own and sustainably manage the land directly. These organizations may own and provide long-term leasing opportunities that enhance soil health. They may also resell the property with the easement to a new farmer dedicated to agricultural conservation   

For farmers and landowners looking to start the conversation, one of the best places to start the process is AFT’s database of Regional Navigators. The network consists of AFT partner organizations like HVADC. Regional Navigators have dedicated staffs that provides training and on-the-ground customized support for farmers and landowners across all the specific regions of New York. CCE Orange County and Orange County Land Trust are also in the network, with the land trust working directly with easements.  

“Talking about farm and ranch succession planning is hard. We want to make sure farm families know there is an amazing stable of organizations here in the Hudson Valley that specialize in making it as easy as possible,” said Johnson. “The future of agriculture in the Hudson Valley and the United States hinges on the healthy transition of functioning farms from one generation to the next. We are here to help farmers do this vital work.”  

Jack Hornickel, Staff Attorney, Food and Beverage Law Clinic, Elisabeth Haub School of Law, Pace University concluded the workshop with several case studies showing a variety of examples of succession planning including transitions to family and non-family members. The case studies outline the legal tools used and the costs involved.  

The January 19 session was recorded and is available HERE to view, along with the presenters' supplemental materials.  

For those completing a viewing of the workshop recording, HVADC is offering qualifying farms interested in starting the transition planning process $250 worth of Business Technical Assistance through the Incubator Without Walls program. If you are interested in this offer or wish to be connected with any of the presenters, please contact Avalon Bunge at abunge@hvadc.org or call 518-432-5360 x 303.