For farmers and ranchers, thinking about the day they retire isn’t easy. And talking about it is even more difficult. Succession and transition planning is one of the most emotional topics in business. If not approached the right way, it can certainly go wrong — but if not done at all, it can be disastrous.
With the holidays coming up, you’ll likely be spending a lot of time with your family. Whether you’re a farm or ranch owner looking to broach the transition topic with your adult children, or you’re looking to get your parents started in this crucial process, you can benefit from these simple tips on how to talk about agricultural succession planning over the holidays.
Tip 1: Understand each other’s challenges
Before you bring up ranch or farm transition planning, it’s important to understand the rest of your family members’ challenges and how they may react to you broaching the subject.
If you’re trying to bring it up with your parents, there are a lot of reasons why they may be hesitant to think about the future. For some, their farm/ranch is their entire life. They enjoy working it, or they genuinely don’t know what they’d do with themselves given the free time that comes with retirement. They wonder, “If I transition to my kids, will there still be a place for me?”
Other farmers and ranchers worry about how they’re going to split up their assets between the sons/daughters who work on the farm/ranch and those who have left to pursue another career. Given the likely disparity in income, how can they make things fair for and prevent a rift between their children?
On the flipside, if you’re the parent in this situation, it’s important to understand the challenges your children are facing. If one or more of them are working the farm/ranch alongside you, and will continue doing so after your retirement and/or passing, they are rightfully concerned about their own future.
A lack of clear understanding about how and when the farm/ranch will transition to them can leave them frustrated and even wondering if they should instead pursue a different career — especially if it seems like you’re not interested in ever retiring!
Tip 2: Recognize each other’s strengths
The two (or more) generations involved in transitioning a farm or ranch bring different strengths. Recognizing this is another important step in being able to talk about how and when to start the transition process.
What I’ve seen before is, parents are well versed in dealing with the bank, obtaining crop insurance, doing the farm/ranch’s books, and generally taking care of the business side of things. But these skills haven’t been passed on to their children. While those children grow into adults capable of handling the actual farming or ranching part of the business, they may not be equipped to take over full management if something were to happen to one or both of their parents.
As a parent and experienced farmer/rancher, you also have a lot of knowledge and wisdom to pass on to your children to further help them succeed when they do take over for you. Retirement doesn’t have to mean complete un-involvement in the business. If it’s important to you to stay involved in some ways, recognize how you can lend your strengths to your children, while still ensuring they’re prepared to keep the farm/ranch running after you’re gone. You won’t be around forever.
It’s also important for parents to recognize the strengths of their children. As the world continues to change around us, newer generations are often very good at thinking outside the box. They can come up with new ways of doing things, new business lines and, in general, new ideas that help the farm/ranch make more money.
Recognize that your children have their own strengths to bring to the table, and trust that those strengths make them capable of keeping your legacy going.
Tip 3: Acknowledge what will happen without a transition plan
You probably still need a sense of urgency to get you started in the ag transition process.
Many farmers and ranchers believe they have plenty of time to start planning, or they never seem to have time “right now” to begin. But I’m betting we all know someone — a neighbor or even a family member — who has died in an accident on the farm or ranch.
Life is unexpected. If you pass away without a plan in place, two things are likely to happen.
First, as mentioned, the next generation might not be as prepared to take over both management and operation of the farm/ranch.
Second, the government is going to decide what happens to your assets.
I’ve yet to meet a farmer or rancher who is OK with this happening. The sooner a plan is in place, the more protected your farm or ranch is, and the more secure your children’s futures are.
Tip 4: Be open and honest with each other
Since ag transition is such an emotional topic, the most important tip I can give is to be open and honest with each other.
I’ve seen situations where Mom and Dad made plans but didn’t actually tell their adult children what those plans were. When they passed away, their son who worked on the ranch inherited everything, but their daughter who worked off the ranch inherited nothing and felt a lot of resentment towards her parents and brother for it. There was no opportunity for her parents to explain their motivations and decisions to her, and they essentially enabled an ugly rift to open up between her and her brother.
By being open and honest about your goals, and encouraging an open and honest conversation with your parents or your children, you can help keep your family a family.
Tip 5: Identify everyone’s goals
That leads into my final tip: Identify everyone’s goals. The most successful transition plans take into account the family’s individual goals and work toward meeting them.
What are the parents’ goals for retirement? What are the goals for the sons or daughters who will take over the farm/ranch? What are the goals of the sons/daughters who work off the ranch?
It may ultimately be up to the parents to decide what happens, but identifying and talking through everyone’s goals helps prevent frustration and resentment. When you can build a plan around everyone’s goals, you can help build a lasting legacy.
Wipfli can help
At Wipfli, we have helped many ag families not only start the transition conversation but also develop a strong plan that gives everyone peace of mind. Sometimes you just need a third party in the room with you to temper emotions and keep everyone on track.
Ranch and farm transition planning does not have to be a lengthy, overly involved process. We can help you make it easy and get a robust plan in place in a short amount of time.
And if you’re in a situation where none of your children want to take over from you, we can even perform a keep or sell analysis to help you understand whether it would be more beneficial to sell or to lease until your grandchildren are old enough to decide whether they want to take over.
You have options. Let Wipfli help you work through them. Contact us to get started, or click here to learn more about ag transition planning.