Not all farmers and ranchers have thought about succession planning. But they should.
Many farmers and ranchers are focusing on annual year-end tax management. Wisely and efficiently, often with help from accountants or tax preparers or both, they're fine-tuning sales, purchases and other business decisions to hold down taxes and ...
Many farmers and ranchers are focusing on annual year-end tax management. Wisely and efficiently, often with help from accountants or tax preparers or both, they're fine-tuning sales, purchases and other business decisions to hold down taxes and strengthen their farms financially.
But too many farmers and ranchers are postponing - or even ignoring - an even more important, once-in-a-lifetime planning: a realistic, workable strategy to pass on their farm or ranch to a next generation. Whether it's called succession planning or transition planning, it's a map that will help farmers and ranchers navigate complicated terrain.
A few statistics from the U.S. Department of Agriculture and farm organizations illustrate the need for succession planning. The average age of U.S. farmers is 58. Seventy percent of U.S. farmland likely will change hands during the next two decades. And roughly half of farmers don't have an estate plan.
There are many reasons why farmers and ranchers haven't developed succession plans. They're preoccupied with agriculture's daily challenges. Tax laws and estate and retirement planning are complicated. It's difficult to communicate succession planning with family and non-family members involved. Like most of us, many farmers and ranchers are reluctant to confront their own mortality.
Succession planning is difficult in all sorts of scenarios. There is more than one way to do it right, and what your neighbor is doing isn't necessarily the right fit for you.
It's important for each to find the best partner for the future, whether that is a child, multiple children, relatives, a neighbor, a trusted friend or a young ag producer looking to grow his or her farm or ranch.
The passion for farming and ranching along with a strong aptitude are important factors in considering the next generation, whether a family member or not. A next generation focused solely on making money without the passion and aptitude for farming and ranching will be set up to fail.
Often farming and ranching parents understandably want to treat all their children equally, which may be impossible if the farm or ranch operation is to remain viable. Dividing farmland, equipment and buildings equally among, say, three children - and having two of them rent or sell their share to the sibling who farms - may be fair in theory; in practice, however, it can saddle the sibling farmer with a sure-to-fail business model.
Soon-to-retire farmers and ranchers need to focus on equitable treatment, rather than equal treatment, of their children or consider bringing in a non-family member with the passion and aptitude to take on the farm or ranch.
Whatever a family's particular situation, successful transition planning requires good communication. Farmers and ranchers need to talk openly and honestly about their needs, wants and concerns.
It requires compromise. Nobody can or should get everything they want.
And it requires an early start. Once, farmers and ranchers were advised to begin succession planning at least five years before they plan to step back. Now, they're urged to begin at least 10 years in advance, to better position themselves for taxes and other financial considerations.
Agweek has published many articles through the years about the importance of succession planning. Now, with that importance undimmed, we have two stories about succession planning in this week's issue of Agweek to offer strategies and tools to help you get started. (To read those stories, click here and here .)
If you've already started transition planning, congratulations. Keep at it. Though you're probably encountering challenges, you're doing the right and necessary thing.
If you haven't begun yet and are within 10 years of stepping back from full-time farming or ranching, get going this winter. Your state extension service, a certified succession planner, a local estate planning attorney, a financial planner or a banker are all resources to start with. This winter there will be farm meetings across your region with succession planning topics. Get ideas. Listen. There is more than one right way to plan for your farm or ranch. Most importantly, use expertise to form your plan and communicate it to the stakeholders.
No, succession planning won't be quick or easy. But farmers and ranchers pride themselves on hard work and commitment. Those qualities will help them greatly when - and if - they get started on this vital, once-in-a-lifetime job.