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Most Illinois farmland is not owned by farmers

chicagotribune.com

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Re: Most Illinois farmland is not owned by farmers

#141

Post by gopher_space »

bombcar wrote: post #112
TimorousBestie wrote: post #103

Earlier quoted context omitted.

There’s an exceedingly strong cultural drive to keep farmland “in the family” even if it impoverishes or otherwise inconveniences the descendants. I had a coworker once who lives in this region and owns some amount of farmland in a similar situation. He could have sold it and moved his family to at any point; even now I think it would be easily done, if not as easy as in the past. But of course he still lives there,…

There's opportunities for the right person out there, I've seen it a few times - young man (or woman) who wants to run a farm or rural business or whatnot, either marries into the family or becomes "basically adopted" and inherits the business or farm. You have tons of businesses that are viable (produce enough money to support a family) as long as you never load it with debt; because they do NOT produce enough to su…

> You have tons of businesses that are viable (produce enough money to support a family) as long as you never load it with debt; because they do NOT produce enough to support a family and the debt load that would come from buying it.

I've been thinking about this situation as "the bakery trap". The labor dimension here is that the best possible career move for the person you've spent the past n years training is to immediately leave once they've mastered your hot-cross bun recipe.

Re: Most Illinois farmland is not owned by farmers

#142

Post by pfannkuchen »

lotsofpulp wrote: post #133
pfannkuchen wrote: post #107

Earlier quoted context omitted.

Land does weather inflation quite a bit better than T bills do, though.

Some land does. A lot of land does not.

I think this is strictly not a true statement?

Land value can decrease in real terms at the same time inflation is happening, sure. But it isn’t revalued by inflation in the way that a contract denominated in the inflationary currency is.

Can you explain more about what you mean?

Re: Most Illinois farmland is not owned by farmers

#143

Post by toast0 »

lotsofpulp wrote: post #129
travisennis wrote: post #125

Earlier quoted context omitted.

I was just looking at a GIS map yesterday for my area and noticed that nearly every field was owned by an LLC and/or trust. Didn't think much of it at the time until I read this.

In richer parts of town, many houses will be in trusts also. It’s a no brainer if you have a couple thousand dollars to spare for an estate lawyer to do some estate planning and spare your heirs probate court. Plus in the states and wealth levels that many people on this website have, it is also a no brainer to save on taxes.

> It’s a no brainer if you have a couple thousand dollars to spare for an estate lawyer to do some estate planning and spare your heirs probate court.

What I keep hearing from experienced estate attorneys is that California probate court is onerous and worth a lot of effort to avoid, but other state's have reasonable probate; it might still be worth it to avoid probate, but it's not such a big deal. OTOH, dealing with assets in a revocable trust can be a PITA while you're still alive and may not give much benefit while you're living either. If you're not in California, it's worth taking stock of the situation before you use California biased advice.

Having an estate in trust may not actually save on taxes either. Yes, you'll avoid probate fees in California, which is significant. But your estate will still pay estate tax. Otherwise, if an irrevocable trust holds the assets, it pays the taxes, and trusts have very abbreviated brackets; your heirs might well pay less income tax holding the property themselves.

When your heirs/beneficiaries die and their heirs become the new beneficiary, that's not subject to estate tax, which is great, but as a result it doesn't get a step up in basis. If the trust is large relative to the estate tax exemption, it's beneficial to not pay estate tax; if not, it's more beneficial to get a step up in basis.

Certainly, in some situations, trusts are more tax efficient, but you have to actually look at your situation to see. Default everyone should have a trust assumptions add a lot of senseless confusion and delay to the people who don't actually get a benefit from it. There are asset protection benefits from trusts as well, and it's reasonable to consider those depending on the situation as well.

Holding a farm in a trust or llc makes a lot of sense to me, because it makes it easier to split ownership without dividing the farm.

Re: Most Illinois farmland is not owned by farmers

#144

Post by SoftTalker »

arbor_day wrote: post #62

I own the farm and farm it in Illinois. I owe the land through an LLC, because farming is dangerous and I don't want to go bankrupt if somebody sues me. Farms are expensive and hard to subdivide, so people will put them into a legal entity and pass down to the next generation via a trust. All of my neighbors are doing the same, so we're all counted as "not farmers" here Farming is a terrible business. My few hundred…

Yep I own one rental house and it's in an LLC. Very common for any property used as a business to have a business owner of record.

Re: Most Illinois farmland is not owned by farmers

#145

Post by libraryofbabel »

TimorousBestie wrote: post #103
jckahn wrote: post #95

Earlier quoted context omitted.

I imagine there's some satisfaction in feeding people that money can't buy.

There’s an exceedingly strong cultural drive to keep farmland “in the family” even if it impoverishes or otherwise inconveniences the descendants. I had a coworker once who lives in this region and owns some amount of farmland in a similar situation. He could have sold it and moved his family to at any point; even now I think it would be easily done, if not as easy as in the past. But of course he still lives there,…

Yeah, that rings true. I assumed when asking my question that this was something to do with culture, identity, and social status within a particular community. In this case the culture (rural America) is alien to me. But I can understand the idea of making economically "irrational" choices for reasons to do with pride or culture or identity, though in the world I grew up in it's more things like become a classical musician, environmental scientist, or spend 6 years doing a humanities PhD. On the other hand, none of those things involve the allocation of $5M of capital, so there does seem to be something different about this kind of life choice.

Re: Most Illinois farmland is not owned by farmers

#146

Post by rob »

lotsofpulp wrote: post #131
dismalaf wrote: post #128

Earlier quoted context omitted.

Land can be financed over long periods and held forever. So a few hundred grand will pay off $5 million in about 20 years and then that's steady income forever after (as long as you keep farming).

Land can’t be financed, businesses can be financed. Businesses that own land are much more easily financed, with the lowest interest rates. When you buy land to develop, you have to pony up cash for it. I have never heard of a lender lending without a cash flow producing asset as collateral.

> Land can’t be financed

Doesn't seem accurate. See:

https://agamerica.com/land-loans/real-estate-loans/

https://www.farmcrediteast.com/en/FINANCING/Land-Loans

Re: Most Illinois farmland is not owned by farmers

#147

Post by leptons »

harmmonica wrote: post #93
leptons wrote: post #91

Earlier quoted context omitted.

Too bad there aren't books that describe the meaning of words, so this website will have to do... https://dictionary.cambridge.org/us/dictionary/english/most No, "most" does not mean "80%" or any other made up number.

Not the friendliest way to reply, but are you saying 65% does not mean most? Just wondering if we're violently agreeing. I shouldn't have said 80%. Was just trying to articulate that most is a high threshold and also not defined as an absolute number.

No, "most" is not a high threshold. You can say "most" about 30% of something in a group, if the rest are splintered between other groups getting less than 30%.

Maybe you should read the link I provided. It would likely clear up a lot of misconceptions for you.

Re: Most Illinois farmland is not owned by farmers

#148

Post by toast0 »

FireBeyond wrote: post #108
cco wrote: post #104

Earlier quoted context omitted.

In the US, home ownership rates usually hover around 60%. So most homes are owned by the occupant. I suppose if you want to be pedantic and say mortgaged homes are owned by the bank, sure I guess? But I think homes should not be included in your list here.

> I suppose if you want to be pedantic and say mortgaged homes are owned by the bank Well, pedantically, you own the home, but the bank has a lien, and contractual rights in the event of default. But the title is in your name. Contrast to a vehicle, where the lender is the Legal Owner on registration docs, and retains title (in all but two states, I believe).

I've seen vehicle registration documents with an owner and a lienholder. But the lienholder is also in possession of the title (which may be electronic). I see a few more than two states where the owner is in possession of the title, but I haven't lived in any of those.

I think the difference is for real estate, title documents and liens are recorded, whereas for vehicles, titles are registered, and possession of the physical title is almost enough to change the registration; it makes sense for the lender to physically hold the title until the loan is satisfied, in order to prevent a sale without paying back the loan.

Re: Most Illinois farmland is not owned by farmers

#149

Post by quickthrowman »

lotsofpulp wrote: post #133
pfannkuchen wrote: post #107

Earlier quoted context omitted.

Land does weather inflation quite a bit better than T bills do, though.

Some land does. A lot of land does not.

Agricultural land you can cultivate certainly does, particularly irrigated land.

Land in the desert with zero economic value (think Slab City) probably does not keep up with inflation.

Re: Most Illinois farmland is not owned by farmers

#150

Post by quickthrowman »

CGMthrowaway wrote: post #68
dlcarrier wrote: post #14

Most farms are not owned by farmers, most housing is not owned by tenants, most airplanes are not owned by airlines, etc., etc.. Vertical integration can have benefits, but it isn't necessary and has drawbacks. Even when vertically integrated, regulations are often written under the assumption that everything is leased, not owned, so compliance is easier if you own a company that owns an asset, instead of owning that…

>Most farms are not owned by farmers, most housing is not owned by tenants, most airplanes are not owned by airlines, etc., etc.. Sounds nice but it's not true in the US. A majority (60%) of US land in farms is owner-operated.[1] US homeownership is 65% meaning most housing units are owner-occupied.[2] And 60% of North American airplanes are owner-operated not leased.[3] [1] https://www.ers.usda.gov/topics/farm-econo…

How much of the argicultural output do the 60% of owner-operated farms produce?

I’d bet it’s less than 60%

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