Thinking Past Yourself: Farm Succession Planning
May 20, 2013 | Trish Popovitch
“Farming requires you to work and think in long time lines. You start looking at farm management as a generational timeline. So if it would take me 20 to 30 years to really understand all the wisdom that my father had and then also to realize that in order for our daughter to understand the dynamics and really learn the lay of the land will take her 20 years to 30 years.” –David Mas Masumoto Masumoto Family Farm
As more and more folks turn to small farms as a lifestyle choice they often don’t think about the bigger picture. It’s a wonderful notion to help preserve America’s farmland now, but what about the future? Who will take over the farm when you pass away or retire? Farm succession planning is a really important part of modern farming and something every grower needs to think about and deal with no matter their acreage or what crops they grow. America’s farms must become multi-generational to survive. Are you prepared?
Working on the farm with the advice and guidance of the original farmer is the best way to prepare for farm succession. This allows future farmers to understand the ins and outs of the farm management game and the many aspects modern farming entails. The child successor needs to understand and embrace their transition from farm helper to farm owner. Realizing that the child successor has never balanced the farm books, purchased equipment or dealt with lawyers, suppliers and customers is fundamental to making a successful transition. It’s not just about signing some paperwork.
The modern farmer comes in all shapes and sizes and not everyone is a member of a big family with a tradition of farming. Some farmers have no children or spouses. When a farmer wants to retire and has no immediate successors they too must plan for the future. Take Wendi Baroli of GirlFarm as a case in point. Her business is extremely successful, her land is free of chemicals and her animals are healthy. She wants it to stay that way after she is gone.
“My hope is that when it is time for me to sit a little longer and dig a little less that there is another young farmer with the same intentions we have here for stewardship and adaptive agriculture. The farm will be sold to them at a price that will perpetuate the same small farm practices. The farm will have a living deed that requires this arrangement in perpetuity; a living trust to be passed into the hands of future small farmers and stewards. The lifetime estate part allows ‘the farmer’ retirement without selling the land off to the highest bidder. The new farmer purchases at a cost that does not inhibit the enterprise but gives the retiring farmer a small ‘pension,’” explains Baroli. “It is a work in progress but it seems the only way to prevent inheritance tax from wreaking havoc and the need for an end of life new home purchase and the expenses related to beginning anew in retirement.”
Protecting the farmland is all about being prepared for the inevitable and coming out with money to live on and a farm to pass on. The best place to start your farm succession planning is online, reading through some of the succession planning articles and websites offered by cooperative extensions and agricultural organizations whose goal is to inform you of your options and provide the necessary paperwork and documentation to prepare for farm retirement.
There are so many questions to answer as soon as you are able and the succession planning website will use those questions to help you see what planning and options best suit your particular needs. Even if there are children to leave the farm to do they want it? What about the children that don’t live on the farm? Should they receive an equal share of the farm or a fair share of the farm? Should they sign away their rights to ensure their siblings have the necessary control to make things run smoothly?
Broaching the subject of succession planning can be difficult for some families as it raises many questions; not only who will run the farm but the fact that mom and dad are aging, sick or reaching retirement age. It’s an emotional conversation, but a necessary one for folks living outside the world of corporate pensions.
“Succession planning is about implementing one’s goals around retirement and passing a farm and its assets on to others, be these family members or not,” explains Seth Wilner of the University of New Hampshire Cooperative Extension. “People need to be clear about their values and priorities. The farm owners need this with respect to their retirement plans, what they would desire in terms of the farm and its assets in the future, and how they would like to see this transition. The new owners (be they family or not) need to set goals for their transition into ownership, how they want their lives and the farm to be like when they own it and how they would like the transition to go.”
Once all the interested parties have been informed and everyone is on the same page, it’s time to take your succession planning to the next step. Putting things down on paper and filing the right legal documents now while things are fresh is vital. Be sure everyone gets a copy of everything. Transparency and open dialog will make farm succession planning less stressful. Find a lawyer well versed in farm succession planning to help guide you through the process. A number of cooperative extension offer programs, workshops, publications and forms to make the process more manageable.
The only way to make your farm truly sustainable is to prepare for its life after you have gone. Protecting your hard work means taking the time to deal with the sometimes uncomfortable and sometimes cumbersome matter of farm succession planning. We never know what tomorrow may bring so it makes sense to plan for the future. Start your research today.
Minnesota Cooperative extension
University of New Hampshire Cooperative Extension