Farm transition planning is a topic that agriculture families across the United States face. With 87 percent of U.S. farms family owned, and 60 percent of farmers in the U.S. 55 or older, planning for the next generation to take over is becoming an important topic. But sitting down and having that conversation can be unpleasant, especially if you aren’t prepared.
“Everyone recognizes the need for legacy planning, but sitting down with those involved can be tough,” says Dr. Arnold Oltmans, Associate Professor for Agriculture and Resource Economics at North Carolina State University. “The older generation doesn’t care for the topic because it brings up retirement and even death; two very unpleasant conversations for this older American farmer.”
Transition planning allows families to assess their current situation, develop future goals and prepare an action plan for success. Family dynamics, managerial styles and physical resources can all play a role in each family’s planning process.
The most important thing to remember is planning can never start too early. Transitioning the farm takes time and patience, and starting early gives families the time to uncover complications with enough time to solve them.
Chris Westmoreland, a recent college graduate, is already starting these discussions with his family. He plans to take over his family farm from his father.
“I’m really looking forward to bringing back some new methods and techniques I’ve learned while in college,” he said. “It’s something our farm needs to continue to grow to support an additional salary.”
Here are some tips for getting started:
Address the Assets
The first step is to address all assets involved and the appropriate way to move those assets. This tends to be a much easier conversation because the transfer of who owns what is fairly simple. A more difficult discussion will be how the inheritance tax will impact this movement of assets. The inheritance tax, or estate tax, can take upwards of 40 percent of the asset. Land-grant universities all over the country hold seminars throughout the year to help families understand the implications such taxes could have on the family farm.
Plan for the Management Transition
This is where things can get tense. The management transition affects not only the successor and retiree, but also key employees and family members adjusting to new management. Employees need time to feel comfortable with a new leader and the successor needs time to cultivate existing relationships while building new connections. Current leaders can supervise the successor’s development by gradually increasing responsibilities. This is also a good time for current leaders to complete a will or develop a trust.
Consult with the Experts
A good first step for current leaders and successors might be to schedule an appointment with their local Cat® dealer. When it comes to equipment, the transition can be a smooth one with consistent service, support and product knowledge.
