Farm Succession Planning

One of the biggest issues facing a farmer/rancher is how to manage the farm/ranch after retirement, disability or death. Most do not have a plan for the orderly succession of the management. Failure to plan may prevent you from retiring, break up the family farm, cause hardship for your spouse and/or cause siblings to fight.

Issues in Farm Transition, Succession & Estate Planning include:

  • Preparing the Family and the Business
  • Confronting issues of transition and control
  • Treatment of heirs including financial assistance
  • Developing the transition/success/plan outline & gathering documents and information
  • Choosing the proper estate planning tools & getting the tools in place

Succession plans typically include the following:

  1. Determine the practicallity of transferring your agribusiness. Are your operations viable for a transfer to make sense? Would it be better to simply lease your land to another farmer (e.g. your child)
  2. Chose a successor.  Is there a family member, friend or employ who is willing and able to assume the responsibilies of the operation?
  3. Begin transferring the ownership and management to the successor.  
  4. Finalize the transfer of ownership and management responsibilities.

The process is usually stretched over several years, especially when the plan is made early. A moderately paced transition will ensure the best chance for success and stability of the operation.

The following are suggestions for making a succession plan:

  • Set a target date for the final day as the primary decision-maker. Start shifing responsibilities ahead of time so you can oversee the transition while still on the farm.
  • Assist in the training and education of your successors along the way. Fully inform them of your daily work because you do necessary things that are not obvious to others.
  • Hold regular meetings to review finances, debt and revenue updates, workload expectations, work schedules, employee issues, equipment,  etc.
  • Work with professional advisors in the transfer of assets, debt restructuring, business structures, and other financial/legal issues.
  • Consider having a buy-out agreement in place if multiple successors are involved.
  • Consider off-farm family members’ expectations and needs. A buy-out agreement of off-farm heir’s interests may be appropriate.