With increasingly innovative ways to provide home healthcare, it is possible for many people to stay home in situations where earlier generations facing the same or even less severe medical needs would have been forced to move from home.
Additionally, seniors now typically own real estate longer than ever to help the junior generation avoid capital gains taxes.
These societal changes challenge our region’s traditional family farms because those farms are often headquartered at “Mom and Dad’s place.”
When junior generation farmers see the need for new and larger grain handling equipment and buildings, they often seek to locate those improvements at the home place, which leads to inevitable legal questions.
If the junior generation owns newer buildings and has also installed other improvements like concrete and driveways on the home place, but the senior generation owns the land and older buildings, what happens later when the senior generation dies or a creditor gets involved?
Much of the time, the new buildings and improvements are installed before anyone thinks to address the problem. This is often because the junior generation evaluates the opportunity to grow/improve as being too good to pass up or because the necessary outcome seems so logical to the farmers.
The solution to this very common situation should be as unique as the layout of each farm. However, there are primarily three methods used to legally iron out this situation.
The first method is to convey the home place to the junior generation. If the junior generation is actively farming, the ownership should be titled in a separate entity from the active farming operation. This method facilitates the junior generation’s ability to get financing for even more improvements, but this method makes it more difficult for the senior generation to get financing for improvements to the house, like improvements for handicap accessibility. Obviously, a rent-free lease for the senior generation to use the house should be a component of this method.
The second method is the converse of the first. The senior generation can lease the home place other than the house to the junior generation. This method’s biggest challenge is the inability of the junior generation to use the home place as collateral for loans to pay for improvements to the home place. However, this can provide additional liability protection from farm accidents. Nevertheless, without Medicaid planning, this option leaves the home place potentially vulnerable to being countable for purposes of long-term care medical assistance, including in-home medical care assistance.
The third method is to subdivide the home place property into one parcel for the house and another parcel for the rest of the home place. The ticket here is to ensure that the house can pass a septic inspection with the health department or that the lot upon which the house will be located is of sufficient size to avoid such inspection. The lot upon which the rest of the property is located should also be titled in the name of an entity separate from the junior generation’s operations.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.