The family farm is an important part of agriculture as well as our rural economy. You have put a lot of time and hard work in to get your farm business to where it is today. Now you want to step back a little and enjoy retirement, what is the next step?
The dream is that the farm will pass to the next generation. What do you need to do now to start the process of transferring the farm to the next generation? Is there a next generation willing to take it over?
This is where a good succession plan comes into play. A good succession plan prepares for your future and ensures that the farm stays in good hands. It also gives you peace of mind.
Succession planning is a process, not a one-time event. The sooner you start the more options you have available.
Succession planning requires putting together a strong team to advise you. This will include your tax preparer, attorney, loan officer and possibly a consultant or facilitator along with all interested family members. Your investment adviser and insurance agent should also know what you are planning. All parties should work together. Multiple meetings should be planned with the initial discussions used to set up a framework to be followed. Communication is key for the entire team to work well together.
Failure to plan limits your options and creates discord among family members. If the owner of a farm dies without a succession plan, state law dictates how the farm and assets are distributed, giving the family little say in the matter.
Your team will help you to consider all options. Your tax preparer will seek to keep the tax aspects of your decisions as low as possible to help with the continuation of the business. Your attorney will draft the documents needed to carry out your plans. Your loan officer will help determine if the plan is something the next generation can afford.
Succession planning for farmers is unique and no two situations are the same. Farm families have often lived on the same farmland for generations and have strong emotional ties to the land.
A successful succession will address your financial security in your retirement years and will balance that with the financial position of your successor. It will also address the knowledge and skills of your successor to continue the legacy of your farming operation.
All family members should be considered. However, that does not necessarily mean equal distribution among all children. Some children may be entitled to more or less of the estate based on their personal sacrifice to their parents or the farm.
A well-structured succession plan increases the chance of the continued profitability of the farm along with family harmony.
It is our hope that you will take this important step in securing a successful transition to the next generation. Remember, if you have questions, do not be afraid to ask!