How Do You Start a Farm Succession Plan When All Previous Attempts Have Failed?
The Problem (submitted by A.B.)
Our No. 1 goal is to get our estate and farm succession planning in order this year. Things are hitting close to home. Last year, one of our friends passed away; another has severe health issues. If something happened to us right now, our farming child would have a mess on his hands between the management decisions, debt load, current ag cycle, and siblings/in-laws. The frustrating thing is that we’ve started this process a couple times now, but we just can’t seem to get any traction. Things come up and priorities fall off. After multiple failed attempts, how should we get started and make it work this time?
This is the time of year when most people set goals. Gym memberships explode as people desire a healthier lifestyle. The real test comes in a month or two. For many, the weight of everyday life is soon heavier than the weights at the gym. The same thing can happen to your planning. You ask how to start again. However, I would respectfully suggest that starting is not your problem – it’s finding the intentionality to finish!
I encourage you to focus less on the how and more on the why and the who. Why is your farm succession legacy critical to you? Who is depending on you to make the right decisions? If you continuously focus on your reasons for why and who, then the how will present itself. You will gain the traction you need to cross the finish line in 2020.
Do any of the following apply to you?
Without a farm succession plan, farming heirs have significantly less control over their future. Rent prices, purchase values, and management decisions become negotiated attempts to meet siblings’ and in-laws’ expectations. Their expectations aren’t guaranteed to match the parents’ values.
With a solid farm succession plan, operational consistency is maintained whether the parents are living, incapacitated, or passed away. Steps are taken to make potential buyouts cash flow today and in the future. Farm heirs also have greater commitment and visibility knowing their efforts will be rewarded.
Without a farm succession plan, the off-farm heirs inherit valuable assets, but they’re limited in what they can do with it. The net rent offers maybe a 2% or 3% return on an illiquid asset. If they sell, they get a lump sum of cash. Most aren’t looking to break up the farm, but every night they go home and must answer to their family and their own financial situation.
With a solid farm succession plan, there is often a path where the off-farm heir can maintain land ownership if everyone agrees. However, if they want or need out to pursue their own interests, then there is an exit strategy in place that keeps the farm whole.
Without a farm succession plan, the surviving spouse is often forced to play the referee. The burden is on his or her shoulders to make the right call for the next generation.
With a solid farm succession plan, the surviving spouse can focus on being a parent and grandparent. Peace of mind comes when you know you’ve done your best to be a good steward over your farm and your family.
Keeping your why and who firmly planted in all your decisions can help you clarify your goals, communicate your vision, and keep this a priority. If you’re struggling, consult advisers who can truly understand your situation, present viable solutions, and have a track record for getting plans done. I hope you meet your 2020 goals!