New Iowa law changes process for partitioning estates; goal is to help ‘save family farms’

It is too common a story line in farm country: The parents pass away, and the entire farm has to be sold to resolve inheritance disputes. In many states, when heirs can’t agree on how to split the property, one common option for a judge is to order a “partition by sale,” with the money then proportionally divided among them. 
But what if one of the family members would like to continue farming the land?
“Partition by sale” doesn’t account for this desire among some heirs — a concern that led Iowa legislators to pass SF 2175 this year. “It is a bill to save family farms,” Rep. Lee Hein says of the new law, which took effect in July.

Here is how the new partition process will work. First, when disagreements exist among heirs of an Iowa farm, a court-appointed “referee” will establish the value of the land. The determination of fair market value must be completed by three disinterested, knowledgeable appraisers. Each heir will then have 30 days to object to the appraisal, as well as have the chance to buy out other family members, without having to put the property up for sale.

SF 2175 was passed unanimously by the Iowa House and with only one dissenting vote in the Senate.

“[It] just made a lot of sense,” Hein says. “It allows families to equitably divide properties with an unbiased third party determining the value. It seems like a good way to compensate off-farm heirs, and allow the farm to move to the next generation.”
A 2016 state Supreme Court case in Iowa helped bring this “partition by sale” issue to the forefront. That case involved siblings and farmland that was not easily divided into equitable parcels. In their decision, the justices ruled that all of the property had to be sold, even though one of the family members wanted to continue farming the land.
Across the Midwest, the disposition of farmland will be an increasingly important issue for states as the nation’s population of agricultural producers gets older and older. Over the last 30 years, the average age of farmers has increased from 50 years old to 58.3, and during the next two decades, an estimated 70 percent of U.S. farmland will change hands, the U.S. Department of Agriculture estimates.
According to USDA and American Farmland Trust research, by 2030, older women may own 75 percent of transferred farmland, often serving as “non-operator family landlords” (see map for current figures from the Midwest on the prevalence, generally, of non-operator family landlords).
How that land is used and owned by future generations will depend in part on the direction that state legislatures give the courts.
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Stateline Midwest: October 20183.82 MB