A Practical Guide for Iowa Landowners
By Heritage Land & Auction Group
Inheriting farmland can come with a lot more than the land itself.
For many families, that farm represents decades of hard work, memories, family history, and financial value. At the same time, inheriting farmland often happens during an already difficult period following the loss of a loved one.
Then come the questions.
What is the farm worth? Is there a lease in place? Who is farming it? What are the tax implications? Should we keep it, rent it, or sell it? What happens if multiple family members inherit the property and everyone has a different idea of what should happen next?
The first thing we tell families is simple: you do not need to have all of the answers immediately.
Whether you plan to own the farm for the next 30 years or believe a sale may eventually make sense, taking the time to understand what you inherited can help you make better decisions and protect both the value of the property and your family’s relationships.
Here are several things we believe every farmland heir should consider during the first 90 days.
1. Gather the Farm Documents
Before making decisions, start by figuring out exactly what you have.
Gather as much information about the property as possible. This may include deeds, abstracts or title documents, current farm leases, FSA information, CRP contracts, property tax statements, surveys, drainage or tile information, easements, insurance documents, and any other agreements related to the farm.
If there is a current tenant, understand the terms of the existing lease and when it expires. If you inherited the property with siblings or other family members, make sure everyone has access to the same information.
You don’t necessarily need to understand every document on day one. The goal is simply to get everything in one place so you and your advisors can begin putting the pieces together.
2. Understand the Farm’s Value and Your Stepped-Up Basis
One of the most important considerations after inheriting farmland is establishing its value around the time of inheritance.
Under current federal tax rules, inherited property generally receives a new tax basis tied to its fair market value at the owner’s date of death. This is commonly referred to as a step-up in basis.
For farmland that may have been purchased decades ago for a fraction of its current value, this can have significant tax implications if the property is eventually sold.
For example, a farm purchased generations ago may have an extremely low original cost basis. If an heir later sells that farm without properly documenting its stepped-up basis, determining the taxable gain can become much more complicated.
That is why obtaining a credible opinion or appraisal of the property’s value near the time of inheritance can be important, even if you have absolutely no intention of selling the farm today.
Your CPA and attorney should ultimately advise you on the tax and estate implications specific to your situation. A qualified land professional can help provide the market information necessary to understand what the farm may be worth.
3. Don’t Feel Pressured to Sell
Inheriting farmland does not mean you need to sell it.
Some families immediately know they want to keep the farm. Others know a sale makes sense. Many simply aren’t sure yet.
All three situations are completely normal.
If the property has a good tenant and is generating income, continuing to own the farm may be an attractive option. For other families, dividing rental income among several heirs may become complicated, or the capital tied up in the property may be better used elsewhere.
The important thing is understanding your options before making the decision.
We regularly talk with landowners who have no intention of selling. Sometimes they simply want to know what their farm is worth, whether their rent is competitive, or what opportunities may exist for improving the property.
A good land professional should be willing to help you understand the asset without making you feel pressured to put a “For Sale” sign on it.
4. Have the Family Conversation Early
Some of the most difficult situations involving inherited farmland have very little to do with the land itself.
They involve family.
One sibling may want to keep Grandpa’s farm forever. Another may live several states away and prefer to sell. Someone else may want to farm it themselves. Another heir may simply need their share of the money.
None of those viewpoints are necessarily wrong.
The problems often begin when expectations were never discussed.
When multiple heirs are involved, having an open conversation early can prevent misunderstandings from becoming larger disagreements later.
What does each person ultimately want? Does keeping the farm matter to the family? Is income important? Does anyone want to purchase the other heirs’ interests? Would everyone consider selling if the right opportunity came along?
These conversations aren’t always easy, but they are usually much easier before major financial decisions have to be made.
5. Build the Right Team Around You
Farmland can represent hundreds of thousands or even millions of dollars in family wealth. You shouldn’t feel like you have to navigate everything yourself.
Depending on the situation, your team may include an attorney, CPA or tax professional, financial advisor, farm manager, lender, and land professional.
Each person serves a different role.
Your attorney can help with estate, ownership, title, and legal matters. Your CPA can advise you on taxes and basis. Your financial advisor can help determine how the property fits into your overall financial picture.
A knowledgeable land professional can help you understand the farm itself: its current market value, comparable land sales, rental potential, buyer demand, improvements, and what your options might look like if you ever decide to sell.
The best decisions usually happen when these professionals are communicating and working toward the same goal.
6. Think Beyond the Next 90 Days
Once everything is organized, start thinking about what you want this farm to look like five, ten, or twenty years from now.
If you plan to keep it, who will manage it? How will tenants be selected? How will rental rates be determined? Are there improvements that should be made?
If multiple family members own the farm, how will decisions be made?
And eventually, what happens when ownership passes to the next generation?
This is where planning becomes incredibly important.
One thing we see far too often is a landowner passing away without ever having a meaningful conversation with their family about the future of the farm. The heirs are then left to make major financial and emotional decisions while trying to determine what Mom, Dad, Grandpa, or Grandma would have wanted.
Those situations can put unnecessary strain on families.
If you currently own farmland, one of the greatest favors you can do for the next generation is to start those conversations while you’re still here to be part of them.
You don’t necessarily need every detail figured out today. Simply communicating your wishes and beginning the planning process can solve a lot of problems down the road.
You Don’t Have to Make the Decision Today
There is no single right answer for what to do with inherited farmland.
For one family, keeping the farm and collecting rental income may be exactly the right decision. For another, selling and reinvesting the proceeds may make more sense. Sometimes one family member wants to buy out the others. In other situations, the family simply needs time.
Our advice is to slow the process down, gather the information, understand what you own, and surround yourself with people you trust.
At Heritage Land & Auction Group, our job isn’t simply to sell land. It’s to help landowners understand their property and make informed decisions about one of their family’s most valuable assets.
If you’ve recently inherited farmland, are working through an estate, or simply want to start planning for the next generation, we’re always happy to have a conversation.
Sometimes the best first step isn’t deciding what to do with the farm.
It’s simply understanding your options.
Heritage Land & Auction Group
Secure Your Heritage.
This article is intended for general informational purposes only and should not be considered legal, tax, or financial advice. Estate and tax situations vary, and landowners should consult with qualified legal and tax professionals regarding their individual circumstances.