So, you just inherited a farm and you’re not sure what to do. Maybe it’s been in the family for generations. You have fond memories of running through the cornfields as a kid, arms outstretched as you played hide and seek or tag. Or it’s land you never dreamed of owning, forgotten as you moved on and out, trading country for city, tractors for public transit. But it’s yours now and what you do next is not an easy decision. Hopefully, the answers to the questions posed below help you sort out what’s best for you.
What do you do with an inherited farm?
First things first: What’s the value of the farm you just inherited and how many people inherited it? If it’s one individual, that makes things a bit easier; if it’s a group, then the more complicated it can become.
Evaluate the land. Look at location – is it in an area that may be on-deck for development? Is it off the beaten path? Identify other factors of the land: riparian access, soil health, conservation practices already adopted and whether or not the land is already generating income. Are you inheriting a working farm? One with a farming tenant established or will you have to find one if you choose to keep the land and not farm yourself? Iowa State University Extension and Outreach (ISU-EO) recommends having the land appraised to understand the full scope of the inheritance: buildings, facilities and land improvements will all be taken into consideration by an experienced broker with a letter of value, or by a certified appraiser. That will allow you to understand the true value and potential price per acre of the land.
Should there be multiple individuals inheriting the land in question, maintaining open communication during the process is key to making a complicated transaction a bit easier on everyone. Perhaps one of the individuals wants to farm the land; others could maintain co-ownership as investors. Or, even better, the entire group elects to maintain the land as investors and agrees to leasing it to a farm tenant and/or hiring a farm manager to help make best farm management practice decisions. There are multiple factors at stake here and being able to talk about these difficult decisions will make the process smoother for everyone involved.
Should I sell inherited farmland?
Selling inherited farmland is probably the easiest decision for most, especially non-farmers who inherit the land. It turns the entire thing into a clean transaction with financial benefits for those involved. Of course, you need to be aware of several factors if you decide to go this route: sale price, income tax basis on the property and, even, the sale method (standard land/real estate listing versus auction). According to ISU-EO, some states even have special tax incentives for those who sell their land to a beginning farmer.
Can inherited land be sold?
Of course! Just like any type of land or house or other item of value, farmland can be sold. It’s really no different than anything else. As long as you have the title in hand, the decision to sell is yours. Some farms and land may be ideal for a multi parcel auction, while others benefit from a traditional listing.
How do I sell my inherited land?
First things first: make sure it’s ready for sale. Tie up any loose ends with the inheritance. If the estate is in state probate court, you may have to wait for all the deeds and paperwork to transfer into your name before you can contact a licensed land professional to help with the sale. If you decide to skip this step, you might have problems later on.
Then, give Geswein Farm & Land Realty a call. Their experience in marketing and selling farmland to the right audience makes them your expert in the farmland marketplace. They’ll make sure contracts are correct and work with you all the way through the closing and exchange of title and keys.
Is the sale of inherited land taxable and how is it taxed when sold?
That depends. According to the IRS, just receiving the land shouldn’t create any extra taxes owed; however, should you sell it and make a profit, you will owe capital gains taxes on that amount.