Keeping a farm in the family through several generations takes good planning, excellent communication and more than a little bit of luck. Often succession planning is not considered early enough by either generation.
Often, families “talk”, but not about the business of the farm and it’s future. Fathers do not know if their offspring are willing or able to take on the job. Children are not sure if they want to spend their future on the farm or that their father is ready to turn over the reins. Many years can be lost while both parties make assumptions about the other’s intentions. Frequent, open, direct communication is crucial.
Many families delay succession planning because of unresolved issues and uncertainty surrounding the lives of the individuals. Common delays to preparing the succession plan include:
- Waiting for children to make career decisions. Parents often don’t want to “force” children into the farm business, so they wait for the kids to choose. Sometimes that means waiting for several years of college in addition to years of outside work.
- Concern about the stability of the children’s relationship/marriage. If the child is willing, but their spouse is not, the entire plan is in jeopardy. It forces the child to choose between the farm or their relationship and, without knowing which way that choice might go, the parent is likely to wait and see how things turn out before moving forward.
The obvious solution is communication, but it is not always the easiest. Holding single-subject meetings, early and often, with the involved parties can be very helpful. Lay out expectations in writing. Develop a “succession ladder” that keeps all parties aware of what is next. One idea assigns responsibilities that correspond with an age so that as the younger generation matures, they take on more and more responsibility for the farm. Similarly, the older generation has progressively less responsibility as they get older. For example, at age 25, the younger generation may begin supervising the staff and make decisions about the feed or fertilizer. At age 30, the son/daughter may plan the day-to-day work, decide on the make of new equipment, make annual plans for stock/crop, and choose methods to perform jobs. At age 35, the younger generation may recruit and select staff, negotiate purchases of equipment, and decide when to sell crops/livestock. At age 40, they may negotiate the sales of crops and livestock. Over 40, they may decide and plan capital projects and identify and secure financing. If such a plan exists in writing, long before it is needed, all parties will clearly understand what the expectations are, who is responsible for what, and when new tasks are to be taken over or surrendered. This provides a training timeline as well as avoiding those common delays in succession planning.
It can be extremely complicated to separate business from family matters. The help of a third-party can be invaluable, especially in today’s economy where every single dollar matters. Contact AgriLegacy for estate planning and information to help with these critical decisions. Our annual convention, television program and continuing education can help you create the most appropriate succession plan for your family farm.
