How to hand your operation over to the next generation
Farm transition planning can be overwhelming to consider. Land, equipment, equity and retirement. Where do you start when it comes to handing your operation over to the next generation? Succession planning for farmers and ranchers is both important and complicated, but with the right transition strategies, you can make wise decisions that will ensure your operation is cared for in the future.
The best way to transfer a family farm or ranch varies from family to family so the first step is to define your goals. Prioritize your needs first as these are your assets and deciding what is most important to you can help with who will benefit from your succession plan.
• Is it important for the business to continue?
• Does the successor generation want to provide a dignified retirement for the owner generation?
• Does the owner generation value keeping the land in the family name?
• Do the successors’ priorities match the owners’ priorities?
Your goals should look ahead to your needs in retirement and as you age. Do you wish to have the next generation start to manage the land, purchase equipment and take on more responsibly if they are already not doing so? Talk about these things now while you are still around to provide advice and wisdom and answer questions that may arise.
Consider matters that are important to you such as your home and if that is an asset that you want to remain in the family. There could also be certain charities that you want to pass assets on to. You may also have stipulation on how the land you are passing on should be used.
Determining who should be a part of your farm succession can be a difficult task, but it is your job to make sure your farm or ranch will be managed well so it continues to thrive.
• Are there multiple or one heirs to the operation?
• If there are multiple heirs, who is involved in farming/ranching?
• Do multiple heirs work well together if they want to continue with the operation?
No matter if there is one or multiple heirs, it is also important to have a will in place. While this is a simpler scenario, it does not eliminate the risk of family arguing about their stake in the future of the farm or ranch. A will helps clarify your intentions, even if you can’t entirely ensure harmony after you are gone.
With multiple heirs, the transition process can be more complicated. Effectively navigating the process requires frequent and clear communication with everyone involved. Communicating early and often can help everyone understand the expectations of your heirs and build a succession plan that balances the desires and plans of each heir with your goals.
If there is not a potential successor or heir in the family, but you wish to pass the land and legacy over, you may wish to seek out someone that wants to continue or build on a farming and ranching operation. You may start the process by networking with other farmers, connecting with programs that offer young farmer programs, or consider current key employees in your operation.
Regardless of what option you choose, you should work with a team of farm succession planning professional to make sure you are creating an effective plan. This team usually consists of your insurance agent, lawyer, financial planner or your CPA. Your local banker can also help in some of the transitions and making sure your accounts are set up and your wishes and needs are met.
The size of your estate, your health, age, the number of heirs, where you live and many other factors play a role in this important decision. It is not always an easy subject to think about or plan, but starting early and communicating your wishes and goals is the first step to making sure your legacy is passed down smoothly.
Brian is a 2022 graduate from Bethel University with a degree in Business Administration.
