By Harry Brook
It’s a good question and should be asked occasionally, especially when thinking about transitioning out of farming. Are you farming for the next generation to take over? Is there clear understanding between dad and the children? Is it for a legacy? Are you farming for an enjoyable retirement or are you farming to get bigger? Maybe you see yourself as a steward of the land and want to improve the land? Perhaps you see yourself doing it for a living or a way of life or perhaps it is just to satisfy the bank? How you answer the question determines how you should proceed in your farming operation.
Don’t confuse transition planning with estate planning. Transition planning is the process of planning to transfer the ownership, management and operations to a relative or successor. Estate planning is the management and disposal of a person’s estate at the end of a person’s life.
When planning a farm transition, it is essential to answer this question with all people who are involved in the farm. Everyone’s motivation or goal needs to be brought out. Too often there are unspoken assumptions about the goals of the farm individuals and their plans. Getting it out into the open clears up any ambiguity and chance of miscommunication. Too often, farmers have been the strong, silent types and with the future of a farm at stake, it is vital that everyone puts their cards on the table.
How you approach a farm transfer also depends on the structure of the farm. There are different tools to be used for a proprietorship versus a farm corporation or a partnership. The plan is not accomplished in a few days but may take years to plan, then execute. There is also the issues of entitlement, fairness and equality, compensation and farming versus non-farming children.
Everyone in the family or organization should be able to express their opinions. It also allows an opportunity to make sure everyone has the facts and squash unfounded impressions or interpretations. You can work towards consensus but allow people time to digest what they’ve heard. Keep the conversation on opinions and not the individuals. If necessary, you may have to hire an outside facilitator.
A transition plan helps guide decisions around ownership of the business, leadership, structure, tax strategies and contingency plans. Think of it as a road map subject to change. It needs to be updated and revised over time as circumstances and priorities change. This is no small undertaking and there are no cookie cutter plans that you can use off the shelf. They are specific to your operation and the people involved in it. To work on this usually requires outside help. Find someone to help you with a proven track record.
There is an old truism that says, “Failure to plan is planning to fail.” If you wish to transfer your farm ownership to the next generation, start early, communicate clearly and be ready to change. It starts with good communications with all parties involved. If the transition is done well, it should allow for a sustainable, profitable operation well into the future.