Easton is one of the last remaining rural communities in Fairfield County. The town is a farming haven with zoning regulations that prevent dense and commercial development, and at the same time the zoning regulations encourage agricultural use.
Many of these laws were put on the books during the past century in a conscious attempt to conserve farmland in the area. In addition, a number of land trusts have acquired property during this period of time, and continue to do so.
As a whole, Connecticut is a thriving farming state. In 1982 there were less than 3,500 farms here, but by 2020 that number grew to more than 6,000. An important thing to consider, especially in such an established, vibrant farming community like Easton, is that family succession planning plays an important role in maintaining the stability and economic viability of a farming town.
The most important thing, first and foremost, is to make sure that the real estate is properly classified as a farm. This requires some work at the local and state levels in the form of applications for exemptions and abatements. Being classified correctly lowers property taxes and abates the personal property taxation of equipment and ancillary buildings on the property.
As with all estate planning, the time to start is now. Creating a business plan in conjunction with a succession plan for a farmer benefits future generations.
It’s a farm, but it’s also a business
A farmer is not unlike many small and medium-size business owners. There needs to be operational documents in place that allows someone to take over in case the owner becomes incapacitated or can’t reliably fulfill the farming duties.
This is of particular concern in this part of the country where many children who are raised on farms go off to college and blaze their own trails. The likelihood of interfamilial succession from generation to generation at a Northeast farm is lower than you might think.
With proper planning, a farmer can make it easy for the next generation — whether a family member or someone else — to take over.
What if there’s no farmer-in-waiting?
Sometimes a farmer is unable to find a reliable or willing candidate to take over the farm, but still wants to make sure the property is conserved. In this situation, a special easement or covenant may be issued to determine how the land will be used.
If the owner of the farm is still alive, the first thing to do is identify if there’s a manager already in place who may be interested in taking over. There can be a buy-in by that individual to possibly succeed the owner.
Another option is to sell the land to a conservation group or land trust at a discounted price, and sign a holdover agreement so the farm’s operations continue. When the farmer decides to close down for good, or passes away, it will be with the comfort of knowing the land will be conserved.
The possibility also remains that the people working on the farm can form a partnership and continue operations.
Staying operational through succession is important
Many farms, even here in Connecticut, consist of hundreds of acres where the land value could be substantially higher if it was developed. When the landowner dies there is a special valuation, which is less than the market value of the property, because the IRS always assesses estates based on their highest and best use. Those uses would oftentimes be commercial or residential, and not agricultural.
That’s why it’s so important to keep classifications up to date and accurate. If the farm is operational — and the IRS will audit that to make sure — there’s an income tax code exemption that allows that special value for estate planning purposes to be in effect so one doesn’t have to “sell the farm” in order for the next generation to continue operating.
It’s crucial that operations continue in order to realize those benefits on the death of the owner. More importantly, a good succession plan will slowly transfer the property — making gifts during the farmer’s lifetime is advantageous for the next generation.
Farming into the future
“The time to start is now” is a phrase that’s applicable to many things in life. But not adhering to that advice when it comes to estate planning invites a swarm of unique consequences and ramifications. Owners of a farm should have a complete succession plan mapped out during their lifetime.
If that isn’t done, there’s entirely too much opportunity for the situation to become a lengthy, contentious, expensive legal process. And it’s all avoidable. Creating a business plan in conjunction with a succession plan is how farmers in Easton, and elsewhere, can ensure their land remains fertile for generations.
Attorney David Bussolotta, a member of the Agricultural Commission and Pension Board in the Town of Easton, is a member of the Trusts and Estates practice at Pullman & Comley.
