Partnership
A partnership may be used to enable the transfer of farm property from one generation to the next. Usually the child obtains an interest in the farm operation by gift or purchase, or by an operating agreement under which he invests part of his income share in either real or personal property, or by both gift and purchase. Later, arrangements can be made to buy a larger part of the parent’s interest. Provision is then made for the child to purchase the remainder of the parent’s interest at the parent’s death when the partnership is dissolved and liquidated. Often this provision is made by a “buy and sell agreement” whereby the partners agree that the parent’s remaining share shall be sold to one child at the parent’s death. An agreed payment by the purchaser to other potential heirs is made a part of the arrangement. The payments could be made on an installment basis or by using proceeds from life insurance policies.