The new year brings new challenges and the opportunity to make new resolutions. As a farmer or rancher you are faced with many legal issues that affect your ability to make a living and carry on with your lifestyle. Here are just a few challenges that you are faced with:
1. Taxes. It is unknown at the time I write this as to what Congress will, or will not do with income tax rates or with cuts to social programs like social security, medicare, and medicaid. There are some tax certainites, however.
For example, the current Section 179 tax deduction allows small businesses, including farmers and ranchers, to deduct up to $139,000 worth of equipment that is purchased and put into use in 2012. Starting on January 1, 2013, this tax deduction is scheduled to drop to $25,000. In addition, the first year bonus depreciation will drop from 50% to zero. Another major change is the current cap on total equipment purchases will drop from $560,000 to $200,000 in 2013.
Resolve to meet with your business attorney to discuss your plan for dealing with state and federal taxes.
2. Death / Disability. Farmers and ranchers know better than most that there is a time and a season to everything and that one day they will pass on. Most would like to leave to their children the ability to work the land, to raise a crop, or tend a herd.
In order to assure that the family farm or ranch is passed down to the next generation it is important to do some planning. An estate plan may include a combination of a trust, a will, a family limited partnership, and other estate planning tools to limit estate tax liability. There are other strategies that your attorney can discuss with you to limit your estate tax liability at death. Also, a good estate plan will address issues related to your possible disability and who you want making decisions regarding your farm or ranch if you are unable to do so.
In addition, a good estate plan will help you avoid litigation between your heirs and creditors.
3. Regulations. There are many regulations governing farmers and ranchers. You are regulated in how much water you may use, how you apply your pesticides, when and where you can spread manure, and how you handle farm products destined for human consumption.
New regulations and laws are regularly enacted. For example, the law now requires most manufacturing, processing, packing and holding facilities of food to register with the FDA.
Farmers and ranchers should not wait until they have violated a law or regulation to come into compliance with the law. Resolve to meet with your ag attorney to review your agricultural practices and procedures. Your attorney will “audit” your operation to make sure you are in compliance with the law.
4. Financials. Many a farmer and rancher has failed by not paying attention to the bottom line. A farm or ranch is more than a way of life – it is a business. Good decisions require that you have financial information such as an income statement, a budget, and a profit and loss statement.
Meet with your attorney and your accountant to review your finances. Your attorney can help you structure your business in way that maximizes profits and minimizes risk.
Resolve to make sure your financial house is in order so that you can continue farming and ranching for years to come.
– Lance J. Schuster is a lawyer at Beard St. Clair Gaffney. He and his wife raise kids and cattle on their small farm near Idaho Falls. He can be reached at 523-5171 orlance @beardstclair.com.