Estate Planning

Farmers already face an onslaught of challenges: fluctuating markets, unpredictable weather, labor shortages, equipment breakdowns, regulatory demands, and tight finances. Federal financial crime regulations do not usually rank high on their list of concerns. 

Today, we are focusing on exactly that – a new rule from the Financial Crimes Enforcement Network (FinCEN). 

The positive news is that FinCEN’s Residential Real Estate Reporting Rule (RRE Rule), which takes effect March 1, 2026, is unlikely to impact most routine farm operations. 

That said, it is worth raising awareness about these new requirements and alerting farmers to potential new fees and requirements that could arise in connection wither their next residential real estate transaction.

Background
You may recall the name FinCEN from last year’s significant developments surrounding the beneficial ownership information (BOI) reporting requirements for owners of domestic companies under the Corporate Transparency Act. That issue generated considerable attention and debate. 

Now, FinCEN is back in the headlines, this time targeting residential real estate transactions. The RRE Rule was finalized to increase transparency in non-financed transfers of residential property. Simply, the rule aims to curb money laundering by mandating the reporting of beneficial ownership information (BOI) for the owners of businesses (such as LLCs or corporations) or trusts involved as buyers or “transferees” of residential property without a traditional mortgage or bank financing. 

Law enforcement officials believe that all-cash or other non-financed transactions can sometimes serve as vehicles for concealing illicit funds. By requiring the reporting of BOI, they aim to uncover the true individuals behind these legal entities or trusts, ultimately helping to identify, disrupt, and prevent such money laundering schemes. 

When Does the RRE Rule Take Effect? 
March 1, 2026.

What Transactions Must Be Reported? 
Transfers of property are reportable when they meet all of the following criteria: 

• The property is residential.
  • This includes single-family homes, townhouses, condominiums, cooperatives, and apartment buildings designed for 1-4 families.
• ​​​​The transfer is non-financed. 
  • This means there is no mortgage or loan from a financial institution that is already subject to anti-money laundering laws. 
• ​​​​​​​The purchaser of the property is a legal business entity or trust.  
  • This rule does not apply to purchases made by individuals. 
• No exemption applies (see below).

Who Files the Report? 
The best news about this new reporting rule? The buyer (or “transferee”) of the property is not responsible for reporting the BOI to FinCEN (unless they happen to be one of the specific professionals listed in the cascade below). 

Instead, FinCEN assigns reporting responsibility through a structured “reporting cascade.” This hierarchy identifies common real estate professionals involved in property transfers and ranks them in order of priority. The obligation falls on the first applicable professional in the sequence. Professionals can also enter into a written designation agreement to shift the responsibility among themselves for added flexibility and/or convenience.

The cascade order is as follows: 

1. The person listed as the closing or settlement agent on the closing or settlement statement. 
2. If none, the person who prepared the closing or settlement statement. 
3. If none, the person who records the deed.
4. If none, the title insurance underwriter.
5. If none, the person who disburses the greatest amount of funds in connection with the transfer. 
6. If none, the person who evaluates or provides the title evaluation (e.g., Title Examiner, Attorney, Title Agent/Company).
7. If none, the person who prepared the deed.

When Must the Report Be Filed? 
The Real Estate Report must be filed within: 

1. 30 calendar days after closing; or 
2. By the last day of the next month following the month closing, whichever gives the most time. 

What Information is Reported? 
The reporting person must provide information about the transfer of residential property identifying the following: 

• The reporting person
• The entity or trust receiving ownership of the property
• The beneficial owners of the purchasing entity or trust
  • This includes a beneficial owner’s full legal name, date of birth, current residential address, citizenship, and a unique identifying number (an IRS TIN or passport number) 
• Individuals signing the documents on behalf of the purchasing entity or trust
• The seller
• The residential property being transferred
• Total consideration and information about any payments made

Which Transactions Are Exempt? 
FinCEN carved out several exemptions for “lower-risk transfers.” Those transactions that do not need to be reported include:

• Transfers of easements;
• Transfers resulting from death, pursuant to the terms of a will, trust, operation of law, or contractual provision like a transfer on death deed; 
• Transfers as a result of divorce or dissolution;
• Transfers to a bankruptcy estate; 
• Transfers already being supervised by a U.S. court; 
• No-consideration transfers of property by an individual (or married couple) to a trust of which they are the grantor or settlor; 
• Transfers to a qualified intermediary for purposes of a like-kind exchange under Section 1031 of the Internal Revenue Code; and 
• Transfers for which there is no reporting person.

What is the Impact of This Rule on Residential Transfers?
For those transactions subject to the RRE Rule, the most noticeable impact is likely to be an additional fee (or an increase in fees) tied to the transfer of the property. 

The designated reporting person will most likely charge a fee to cover the time and effort required to collect the necessary beneficial ownership information and prepare/submit the report to FinCEN.

What Does This Mean for Farmers? 
For the vast majority of farmers, this rule will not apply. First, farmland is not classified as residential property and falls outside the scope of the rule. Second, most farm acquisitions involve financing. Third, routine estate planning transfers are exempt from any reporting obligations. In short, typical transactions like purchasing, selling, or passing down farmland, including the farmhouse itself, are highly unlikely to trigger any new reporting requirements. 

The Narrow Scenario Where Farmers Might See an Impact.   
That said, there is one specific scenario where a farmer or rural property owner might trigger the RRE Rule. If a farmer chooses to subdivide their property and separately survey off the farmhouse (treating it as distinct residential real estate) and then attempt to gift or transfer that farmhouse to an LLC, then the farmer likely has a reportable transfer on his or her hands. In this narrow case, the transfer likely would not qualify for any of the rule’s exemptions, such as those for routine estate planning gifts to trusts created by the individual, and would therefore require the designated reporting person to collect beneficial ownership information for the parties involved and file it with FinCEN. 

Key Takeaway
In summary, FinCEN’s RRE Rule is not likely to affect the majority of farmers. That changes, however, in certain cases involving non-financed transfers of residential property (such as gifting a home to an LLC or conveying it to a trust where the seller/transferor is not the settlor or grantor of that trust). In those situations, do not be caught off guard if an additional reporting-related fee shows up at closing. 

To be clear, it is not a fine or punishment for anything done wrong, it is simply the expense of doing business under the federal government’s new reporting requirements. 

As with any transaction, proactive planning and clear communication with your attorney, accountant, or other trusted advisors can help ensure everything proceeds efficiently and without unexpected hiccups.  

The OSU Agricultural & Resource Law team just returned from Cincinnati after hosting the Second Annual Cultivating Connections Conference. What a thrill to bring together 121 professionals from across the country who work in farm transition planning!  The group consisted of attorneys, tax professionals, educators, farm legacy counselors, financial planners, and law students.  The commonality among our attendees:  the desire to help farms transition their assets and operations to the next generation.

The old saying, “it takes a team,” rings true for farm transition planning.  The conference illustrated the myriad of topics and expertise required to assemble a farm transition plan and the hurdles a farm family faces.  Like the long line of hurdles that awaited our Olympic athletes in their races this week. But the difference is that farm families aren’t always trained to overcome those hurdles, let alone at a high speed. That’s where the professional team comes in—to help move a family over the hurdles it faces.

Here are a few takeaways on the “hurdle” topics we focused on at Cultivating Connections.

• Don’t jump right to the plan--talk first.  An important first step to building a plan:  get the family talking and thinking.  David Marrison of OSU Extension recommended strategies for working with farm families, including understanding the legacy; encouraging the family to assess its strengths, weaknesses, opportunities and threats; and helping the family deal with the elephants in the room.
• Organize, organize, organize.  A huge amount of information goes into a farm transition plan and organizing that information is a challenge.  Kelly Moore of Make Hay Consulting demonstrated a new tool that can help, the FARMS spreadsheet, currently under development by OSU Extension. 
• Know what’s in an appraisal.  We use appraisals regularly in farm transition planning and estate administration, but do we understand what goes into an appraisal and what limitations it has?  Tim Harpster, an appraiser with Consolidated Appraisal Services Company, answered those questions.
• Divorce is a threat to reckon with.  But a well drafted pre-nuptial agreement can help reduce the impact a divorce can have on a farming operation, as Susan Montgomery of Gottlieb, Johnston, Beam, Dal Ponte PLL explained. Farm transition planners also need to understand the process of divorce and parenting plans, and how they can affect a farm family.
• Be careful with business entity discounting.  Whether for “lack of marketability” or “lack of control,” business entity discounts can reduce the value of an estate and limit federal income tax exposure—but they need to survive IRS scrutiny. Peter Woodlock of Youngstown State highlighted issues with discounting.
• It’s time to think about the 2025 estate tax sunset. There are strategies to employ now to prepare high-wealth farms for the possible reduction of the federal estate tax exemption in 2025.  David Malson of Barnes and Thornburg LLP walked us through a few of those strategies.
• We need to encourage and mentor more rural professionals. There's an alarming shortage of legal and tax experts who can advise farm owners and operators in rural areas.  Beth Rumley of the National Agricultural Law Center led a panel of young attorneys--Johnny Cottingum of Wright & Moore, Eli Earich of Barrett, Easterday, Cunningham and Eselgroth, and Jennifer Harrington of Iowa State University--to discuss issues and solutions for reducing these "rural deserts."
• Know the ethics rules.  When an attorney represents a farm couple, farm family, and/or farm operation, lack of awareness about potential issues with confidentiality and conflicts of interest can get an attorney in trouble.  Jesse Richardson of West Virginia College of Law laid out the rules of professional responsibility that can affect farm transition planning.
• Plans can differ.  The conference ended with a case study that challenged all to assess a family’s situation, its farm transition plan, and the administration of its estate and federal tax return.  A range of ideas and analysis by conference attendees emerged.  What we learned:  there can be different paths to the same goal—different ways to jump the hurdles.  But in all cases, it takes a team of professionals to get the family through those hurdles.

Learn more about the Cultivating Connections Conference on the Farm Office website.  Consider joining us next year for the third annual conference, hosted by Iowa State University’s Center for Agricultural Law and Taxation, on August 4 and 5, 2025 in Ankeny, Iowa. And to stay involved with professionals involved in farm transition planning, consider joining the Association of Farm Transition Planners by signing up for the list serve.

Written by David L. Marrison, Professor & Field Specialist in Farm Management, OSU Extension

“I guess it comes down to a simple choice, really. Get busy living or get busy dying.” This famous line was quoted by Andy Dufresne, played by Tim Robbins, in the iconic movie titled “The Shawshank Redemption” released in 1994.

As we each traverse through our lives, we all are presented with moments that make us pause and reflect on how precious the time is we have been given here on earth. Every time I watch The Shawshank Redemption, I pause and think of the deeper message in this line:  that life can be spent going through the motions and waiting around for something to happen or you can make something happen.

As we look at developing a plan for transitioning the farm to the next generation, are we waiting around for something to happen? Or will we work to make something happen? As farmers, we have to contend with and solve the day-to-day problems which arise on the farm. And there is never a shortage of problems that arise. Because of this, the time for deeper planning functions such as farm transition planning is often pushed down the to-do list.  So, what will be the trigger to make something happen with regards to your succession plan?

What will be your trigger?

One of the hypothetical questions we pose in farm succession workshops is, “What knowledge would you need to pass on if you knew you had only two months to live?” This exact scenario happened to our family in 2010 when my father was diagnosed with pancreatic cancer just as we entered into Spring planting season on our dairy farm in northeast Ohio. 

My father valiantly battled this disease but passed away seven weeks later. Our family learned a lot and had to scramble to manage the farm in the midst of his illness. I am grateful for the short time we had with my dad to make preparations. But it was not long enough to learn everything we needed to know to run the farm without him.

I challenge you to think how your farm and family would react to the loss of the principal operator.  What knowledge and skills need to be transferred to the next generation so they can be successful without you? What can you do today to make something happen?

Who Will Manage the Farm in the Future?

As you develop your succession or transition plan, there are a myriad of decisions to be made. These decisions include identifying the next leader/manager of the farm, how to be fair to off-farm heirs without jeopardizing the future of the on-farm heirs, how to distribute assets through the estate plan, how and when the senior generation will retire, and how the business will deal with unexpected issues such as divorce, disability or paying for nursing home expenses. I would contend that the most crucial planning functions are to identify the next manager of the farm and then strategically plan how to develop them to lead the farm in the future.

The first step is to identify who the next leader or leaders of the farm will be. The next generation could be an immediate family member (son, daughter, grandchild) or extended family member (brother, sister, niece, nephew). With that said, the next leader does not have to be from your family as some farms have transitioned successfully to a non-blood friend or neighbor. The key is to choose a successor who will be the best caretaker of the farm and the land they will be entrusted with.

As you review potential managers and heirs to your farm, it is important to talk with them about their vision for the future and how it aligns with the current farming operation. What are their goals and aspirations for the farm? What concerns do they have about the future of the farm? 

Complete a skills assessment with each potential heir/manager to examine their current strengths and which areas they will need to receive training in order for them to be a better leader for the farm in the future. Talk with them to learn more about what they would be most concerned or scared about if they had to take over the farm today. Are there additional responsibilities they would like to assume and what is their expectation for an appropriate time for management control to be transferred?

The new manager should have experience with how other farms are operated. Having the future manager work on another farm prior to returning to the home farm is a valuable experience. Mentor relationships should also be developed for the new manager to have a trusted team to help them grow.

Putting the Transition into Motion

The transition can be accomplished gradually by turning over more responsibility and authority to the successor.  In fact, this process may (and should) take 5-10 years. It is important to develop a timeline for transferring ownership, management responsibilities, and knowledge from one generation to the next.

As the senior generation transitions their role and responsibilities to the next generation, thought should be given to the overall labor hours which will be available. In some cases, the responsibilities of two members of the senior generation will be transitioned to a single successor. Think of husband/wife combination transitioning to one of their children. This could cause a labor shortage. Could some tasks be outsourced to independent contractors (like accountants)? Can some production practices be accomplished through custom hire arrangements (silage harvest or cattle breeding)?

The biggest task in the transition plan is making sure the next generation has a firm foundation of knowledge to manage the operation in the future. This will look different for each farm and for the type of manager that is needed.

Owner-Operator. If the next manager is going to be an owner-operator, then training will need to include how to manage all aspects of the farm. These include production skills to raise livestock and/or crop enterprises and marketing skills to effectively market each commodity produced. The owner-operator will also need financial skills to manage the operation’s finances and taxes and human resource skills to manage employees. Additionally, they will need to know how to maintain facilities, tools, and equipment as well as how to manage risk through crop, livestock, and farm insurance.

Owner-Landlord. To the contrary, if the next manager will be more of an owner-landlord, they will need to be trained less on the day-to-day production activities and more on how to manage the farm asset. Some skills which are necessary for landlords include tenant and farm rental management, farm finance and tax management, farm insurance decision making, and facilities and other farm assets maintenance.

Strategies recommended for farm businesses to utilize in the transition process are:

• Every person who is part of the business (family member and employees) should have a written job description which includes job duties, responsibilities, and expectations.
• Create an organization chart of all employees and how each employee relates to one another.
• Develop a timeline for the successor to work through each job description on the farm. It is good to start the new family member as an employee and not the top manager.
• Provide meaningful opportunities for decision-making as well as accepting responsibility for the future manager.
• Develop a plan on how the future manager can increase their equity in the farm business through gifting, purchasing or inheritance.
• Develop a timeline for retirement and managerial transfer from senior generation to the succeeding generation.
• Utilize family business meetings to discuss the transfer and changing roles within the business.

Some experts advise that the current manager take a number of planned absences before retiring to provide an opportunity for the successor to see what it is like to manage the business alone. This will also allow the current manager to see that the farm does not fall apart without them. So how do you know if the next generation is ready?  There are two other approaches which you can use to help prepare the next generation to lead without you:  

Opossum Approach. Just as an opossum plays dead, so too should the principal operator.   Take an unannounced week away from the farm during one of the busiest times of the year for your farm and allow the junior generation to take over with no communication from the senior generation.  I know this sounds crazy but how else will you know what knowledge and skills need to be transferred?  It is a lot easier to come back after a short vacation and be able to answer the questions your son or daughter has.  You won’t have this opportunity when you pass away.

365-Day Challenge.  Outside of using the opossum approach, it should be the goal of the senior generation to transfer at least one knowledge point or skill to the next generation each day. So, by the end of the year, your heirs will have 365 new tools in their management toolbox. If you do this over the next five to ten years, you can teach your heirs an incredible amount.

Take Advantage of OSU Extension Workshops

Attend one of our “Planning for the Future of Your Farm” workshops this Winter to learn about the communication and legal strategies that provide solutions for dealing with farm transition needs and decision making.  A webinar version and several in-person options for the workshop are being offered.

Webinar version.  You and your family members can attend the workshop individually and online from the comfort of your homes. The four-part webinar series will be February 5, 12, 19, and 26, 2024, from 6:30 to 8:30 p.m. via Zoom. Pre-registration is required so that a packet of program materials can be mailed in advance to participating families. Electronic copies of the course materials will also be available to all participants. The registration fee is $75 per farm family.  Register by February 2, 2024 to receive course materials in time. Register on this page.

In-person workshops.  Our local Extension Educators are hosting in-person workshops at five regional locations across Ohio. Registration costs vary by location due to local sponsorships. 

• February 2, 2024 - Tiffin, Ohio - Register through this link.
• April 4, 2024 - Lebanon, Ohio - Register through this link.

More information about our Planning for the Future of Your Farm workshops is available at: go.osu.edu/farmsuccession.

Final Thoughts

So, are you ready “to make something happen” to transition your farm to the next generation?  Farm managers are encouraged to think about how the next generation can be prepared to lead the farm in the future.  And as Andy Dufresne stated in The Shawshank Redemption, “remember, hope is a good thing, maybe the best of things, and no good thing ever dies.”  Good luck as you plan for the future of your farm!