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Decisions about the feasibility of transferring assets before death also should include consideration of the parents' financial situation. The parents' assets and liabilities influence their retirement income, the potential estate tax liability and the viability of the farming operation for the next generation. Our guidelines are based on the net worth of the parents. Net worth is defined as the fair market value of all assets minus selling costs and income taxes that would have to be paid if these assets were sold.
This tradeoff between financial security for the parents and opportunities for the next generation is illustrated in Figure 4. The parents whose situation is depicted in the upper left of Figure 4 have a low net worth in a less profitable, small business. Therefore, they would assume considerable risk to their financial security even if they provide relatively little opportunity for their children to take over the business. The parents in the lower right corner of Figure 4 have a high net worth in a profitable, large business. They are in a position to provide a significant opportunity for the children to become established in farming with very little risk to their financial security in retirement.
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