“73% of American farmers haven't identified a successor or created a succession plan!” – Farm Life
Succession planning is a lot like raising a crop. It takes time and starts with planting a seed. Congratulations! Being here means you have already taken the first step of planting the seed.
This journey is more than just planning for the future of your farm. It also ensures the legacy of your hard work and protects your heirs who inherit it. Farm succession planning provides your heirs with a guide to succeed as the next generation of operators and stewards of the land.
Now that the seed has been planted, how do you make it grow? “Succession planning always starts with a conversation,” says Elaine Froese, farm coach and author of Do the Tough Things Right: How to Prevent Communication Disasters in a Family Business. Schedule a family meeting to discuss how family members feel about passing the farm on to the next generation.
Identify and establish your goals in your family meeting. Think about a target date for when you want to retire and what needs to happen between now and then. How much savings do you need to retire? What steps need to be taken to transfer the labor, management, and assets? Make a plan for training and mentoring your heirs who will be taking over for the next generation.
“Farm kids” and “non-farm kids” should both be part of the conversations. Keep in mind that fair does not mean equal. Some things you should consider when having this discussion:
- Splitting farming and non-farming assets between heirs: Obviously, the farming kids will inherit all farming assets including the land, livestock, and equipment. The non-farming kids will inherit non-farm assets like insurance, retirement accounts, mineral or oil rights, and rental/vacation properties. The value of the farm assets may be greater than the non-farm assets. This is where the fair but not equal come into play. The sweat, toil, and sacrifice required to keep the farm operational is a consideration in this scenario.
- Dividing the farm: It might be difficult to come to terms with the thought of dividing up the farm. If you have multiple farming heirs who cannot work together, it's a better option than risking the dissolution of the farm. It's better to separate the farm into different entities. Let each heir control their own smaller farm.
- Protect the farm assets: Certain types of trusts may safeguard assets and protect your estate from creditors. Additionally, farmers are more than twice as likely to owe federal estate taxes than non-farmers. Utilizing trusts can help avoid future estate taxes.
Once all the parties are on the same page with the vision of the future of the farm, it's time to take action. We can help guide you through the steps and put your plan into action. You can get back to operating your farm with the peace of mind that your future is in good hands and on track to meet your goals. To schedule an appointment to get started, contact our Brazos County estate planning lawyers at 979-703-7014.