This is a serialization of the new book written by Carl Flowers, owner of Silveus Plantation, the subject of "Groton's Anonymous Mistress." This 300-year-old house is accessed by Kemp Street near the boundary of Groton and Dunstable.
By Carl Flowers
The predatory snare used against the farmer by government is the farmer's constant need for money. Repair of buildings, need for updated equipment and soil improvement are just a few of the luring forces. The average small farmer's income doesn't keep these needs in optimal condition. Acceptance of money that doesn't need to be repaid is the actual snare. In exchange for the free money, a farmer must agree to a permanent restriction on his land preventing all future development. Restrictions which are not in perpetuity can last for as few as five years to maybe 20 years, depending on the amount of money involved. The result is similar to being shackled with a heavy ball and chain in a river at low tide.
Money a farmer receives from various government programs not needing to be repaid is still subject to state and federal taxes. A quarter to a third of the granted money is skimmed straight off the top to take care of income taxes. That means you don't end up with as much money as you thought. Making up the difference with a bank loan isn't going to fill the void. Banks as a general rule aren't interested in loaning money on land that restricts development. The curse doesn't end with taxes and bank loans. If a farmer wants to build a farm stand on land having a permanent restriction on building, he can't build the farm stand. If he wants to expand a parking area at an existing farm stand, he can't because of the restriction. Changing the type of farming from produce to dairy or dairy to produce is impossible unless the farmer being seduced is capable of predicting the future by reading the stars. Because of exceptions not stated at the time the development rights are given up, the farm's future can be severely blemished.
Inheritance tax presents a big issue. Just because there's a restriction prohibiting development doesn't mean the inheritance tax on the property expired. Historically, the dollar buys less and less every passing year, forcing prices to go up, up and up. In 1949 the value of the Mistress was around $10,000. When my aunt and uncle died in 1980, their estate was in excess of $400,000. The amount over $400,000 was taxed. This meant a few bucks had to be coughed up in order to keep the Mistress from being sold.
Just a couple years ago, an estate over $1,000,000 would be taxed. At $1,000,000 two years ago, a portion of the Mistress' domain would have to be chopped off and sold to raise the needed cash. Fortunately the amount of wealth someone can inherit without having to pay taxes has been raised to $5,000,000. We don't know how long the $5,000,000 will stay in place or when it will become a pathetically low amount. This doesn't include what the state swipes away from an estate. A farm with a house, land, outbuildings and equipment can easily be valued at $1 million or more. For those who say so what about the inheritance tax, let the land be used for more unaffordable housing and more imported food from other countries. Since family farms aren't big money makers, there's not but two or three choices to be made for keeping the farm.
One choice is to cut off a couple house lots that can be sold to pay the inheritance tax. This tactic isn't something that runs on into perpetuity due to a house lot having to be sold by each passing generation of farmers. When the lots are gone, the haunting problem of the inheritance tax returns. In many cases the house lots take away needed money for a farmer to live on due to the constant increase of real estate taxes.
Another strategy is to form a corporation, but the farmer can't own all the corporation's stock at the time of his death if the inheritance tax is to be avoided. You have to get rid of the stock to push down your estate's value. The problem with stock is the fact that you are limited by the dollar amount you can gift to a family member each year. By the time you know which family member wants to farm, you might not live long enough to give that family member the necessary amount of stock to keep the farm out of hock. Size of a farmer's family is certainly a factor but the dilemma is this: What will the other family members want to do with their shares of stock? Maybe they would give the stock to the family member who wants to farm. Another possibility is an irrevocable trust. Unfortunately this option isn't without issues relative to when and how the trust comes to an end.
You have to wonder why anyone would want to keep a farm when a farmer's average income in Massachusetts is around $26,000. This income is the third highest average in the United States.