Farm succession planning, like planning for the succession of any business, is extremely important in the success of the farming operation continuing with the next generation. However, when considering the transfer of the family farm, here are three things to avoid:
Farmers may procrastinate in developing a succession plan because farm succession planning can be complicated and frequently has unique challenges. For example, perhaps a farmer has one or more children who are involved in the farming operation, as well as one or more children who are not. The challenge in this situation is determining how best to divide and distribute the assets in a way that benefits all of the children fairly while compensating those children whose involvement resulted in greater success for the farming operation, as well as ensuring the successful continuation of the farming legacy in the hands of the next generation. Various strategies can be used to accomplish this if they are planned for and/or implemented prior to the death of the farming parents. Unfortunately, all too often, no action is taken during the first generation’s lifetime.
In general, estate planning, and farm succession planning, it is easy to put off for many reasons. First, many individuals find it challenging and uncomfortable to consider his or her own demise. Additionally, individuals may not want to: 1) divulge private information with advisors outside the farming operation, 2) weigh the advantages and disadvantages of the various available options, or 3) make what can be a difficult decision. Further, some individuals may be unwilling to make the investment in time and money to put a plan in place today. That being said, failing to have a plan in place only amplifies any issues or conflict that can arise after the death of the first generation. Additionally, certain planning opportunities may be lost altogether if they are not implemented prior to the death of the first generation.
Communication is key in the successful operation of the family farm, as well as the successful transition of the farming operation from one generation to the next. Keeping the next generation in the dark concerning the succession plan can, and likely will, result in hurt feelings, as well as tension and conflict amongst family members. Collaboration in the planning process allows all of the parties to identify and express the goals and values that are important to each of them, individually and as a family. Additionally, any issues or concerns can be brought to light and addressed accordingly so they do not fester or lead to larger issues. Ultimately, greater understanding and success can be reached when the next generation is involved in the planning process.
No matter the family structure or composition of assets, it is important to work with a team of experts, including attorneys, accountants, bankers, insurance specialists, and financial advisors, who are familiar with the nuances of farming operations and estate planning. Having your advisors work together to develop and maintain a plan that incorporates your values, your goals, and your unique family structure and dynamics ensures that your legacy and unique way of life will be preserved for generations to come.
Farm succession planning can be a challenging process, but fortunately, there are many planning options available. Coming from a farming family myself, and being raised on a family farm has allowed me to truly understand and appreciate the importance of the family farm and the need to preserve this unique way of life. With that in mind, I have a real desire to assist others with the successful transition of the family farm from one generation to the next.
The professionals at Sandin Law are experienced in advising farmers and ranchers with the legal and economic aspects of farm succession planning, as well as assisting with the development of plans that fulfill its clients’ ultimate estate planning and farm succession planning goals. If you have any questions about this type of planning or would like to discuss this type of planning as it relates to your specific situation, please contact our office to set up a consultation.
