Transitioning farm to next generation? Consider your USDA participation


Hello Friends:

Few things make a farmer happier at retirement than handing his/her farm to someone who also loves working the land. In last week’s Farm and Dairy, Chris Zoller discussed legal steps to follow during farm transition to the next generation.

Considering how farm transition affects participation in FSA programs is equally important to do prior to beginning a farm transition plan. A few main factors affecting FSA program participation to consider during transition planning include:

Changes in Farm Operation Structure:

Often while transitioning a farm to the next generation, the plan will include changing the structure of the farming operation. Many decisions about FSA program eligibility are based on whether the structure of the operation is an individual, a partnership, a trust, a LLC, etc.

If your transition plan includes changing the structure of your farm operation, be aware that new FSA eligibility paperwork and determinations will need to be done before the new structure can participate in program payments.

Changes in who can legally sign:

All FSA programs are concerned with “signature authority” meaning who has the legal right to sign contracts for the new operation. Many FSA transitioning participants suddenly find that FSA needs different signatures on program forms than before.

FSA will normally need a copy of paperwork that shows current ownership or the right to sign legal documents, such as deeds or trust papers.

Changes in Actively Engaged in Farming:

Those forming new entities (trusts, LLCs, partnerships) as part of the transition plan will find that all first level members must provide a reasonable amount and combination of labor, management, equipment, land and capital for the new entity to receive the full payment that had been available to the operation before the transition.

As example, if a farm operation goes from an individual to a partnership structure and one of the children lives in another state and does not contribute significantly to the farming operation, then FSA payments might be reduced related to that child’s share in the partnership.

The most important thing to remember:

Talk with your local FSA office about the changes you plan before enacting them, so that you are not caught off guard by how the transition interacts with FSA policies.

You do not need to tell us everything, but it is only wise to understand how planned changes will affect your FSA program payments and participation.

For those who own ground in CRP, contract your FSA office about TIP, Transition Incentives Program, which is designed to aid transition of CRP ground to beginning non-relative farmers.

May your transition plan provide great joy to you and to those who continue your legacy.

That’s all for now,

FSA Andy


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