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How to Get Started Passing on the Farm
When it comes to passing on the farm to the next generation, the process can’t start soon enough.
In most cases, it takes five to seven years to fully transition a farm over, but the shorter the time line, the less options you have, according to Rena Striegel of Transition Point Business Advisors. However, once a family comes together to put together a succession plan, the bulk of the work gets done within the first year.
“If a person feels like they are being pushed out of their operation, that typically makes the process a little harder,” says Striegel. “There’s a part of this than can go pretty quickly when everyone is clear about what they want.”
If anything, what takes the longest are the important discussions families must have.
“When there’s not planning in place, that creates a tremendous amount of uncertainty and fear,” Striegel says. The root of conflict is fear, which she says often comes into play.
“It is very typical to have conflict,” she says. “Incoming heirs want to grow, take advantage of things, implement technology, and more, so tension is very common.”
As more and more generations become involved with the operation, it often becomes difficult to assess who is really inheriting the farm.
A great starting point, according to Teresa Opheim of Practical Farmers of Iowa, is creating a comprehensive history of the farm. Documenting the farm’s history can often help start conversations about succession.
While you’re creating that history, write down how you make decisions about different tasks like land-management practices. “We’ve even seen some (plans) that have a certain amount of money that has to go into land improvements,” says Striegel.
Three Steps to Take Now
1. Call a family meeting.
Opheim suggests hosting the meeting at a location that isn’t anyone’s turf. In someone’s home, it can be harder to make decisions based on logic rather than emotion.
“People have their power roles in place around the kitchen table,” Opheim says.
Striegel suggests asking a third person to attend the meeting and act as the moderator between people who may not get along or who might feel victimized.
2. Include people early.
When people start getting information secondhand, they begin feeling left out, which stirs up conflict, says Striegel.
3. Document your conversations.
Information can transform throughout the transition process, but if all conversations are properly documented, the risk of misunderstandings is nearly taken care of.
“When conversations happen between certain members of the family and not others, others sometimes think the others are making it up,” says Striegel. “That’s pretty common. Get it in writing.”
As generations come home to farm or leave the farm to pursue other work, many relatives naturally give gifts to younger family members. The gesture is generous and thoughtful, but gifts can often be a sour spot in the process of succession.
“You have to be really careful about how things are gifted or given when parents or grandparents are trying to be good parents or grandparents,” says Striegel.
In some cases, relatives cite gifts that were given years ago but weren’t properly documented. “That can be an actual argument that comes up in estate events,” says Striegel. Each gift, like handing over machinery ownership, must be a documented event.
Rena Striegel, Transition Point Business Advisors