First and foremost, start by talking about it now! Not tomorrow, not next week or year, right now. The earlier you start the process, the more options you have available. Balancing your estate and the farm between the kids taking over your family farm and your non-farming children is quite an undertaking and it takes time to set everything up properly to the benefit of all involved.
Good communication is the main key to a successful family farm transfer. If communication is not your family’s strong suit, mediators are available to guide you through this land mine. Schedule some family meetings and start discussing these items as soon as possible.
There is a great amount of resource material available for families considering or in the process of implementing the transfer of their farm. Elaine Froese has an excellent workbook called “Do the Tough Things Right” to help guide families through the process. It can be purchased from her website – elainefroese.com. Here are some steps that families should progress through on their way to a successful family farm transfer.
• First decide if transitioning the family farm business is right for both you and your family. Talk with your family and discuss what each member is willing to “put up with” over the course of the transfer to the next generation.
• Talk about your family’s goals for the future of the farm. Are everyone’s goals for the transition process similar? Conflicting goals can tear a family apart. To start the process, have each family member write down what’s most important to them then share it with the other family members.
• Clarify the family expectations for working together. The older generation needs to be respected for the business that they built over the years. This respect needs to be balanced with the younger generation’s need for trust and responsibility to take on the new business challenges. Both generations involved in navigating a farm transfer can also get help with the process from succession planning specialists.
• Will the children be farming with the parents? If so, the expectations for the farm need to be discussed so that everyone is on the same page. Some things to discuss are, how much time off do people want?
What income will be needed from the farm for everyone to support themselves? Everyone will need to explore and determine the best business arrangement to facilitate an orderly transfer of the farm business. Respect of each other’s different needs is key.
• Ideally you should start the farm transfer process working with a transfer team. The technical details involved in the transfer typically need the help of accountants, bankers, lawyers, financial advisors and other professionals. They all play different roles from understanding the tax consequences, equalization options, potential traps and other roadblocks to the process.
It’s worth repeating to start this sooner rather than later. Realize that it is a process that can take several years to go from planning to implementation. Work with a trusted adviser who can quarterback the whole process and keep it flowing while helping work through the inevitable hiccups that happen.
The advisor can also coordinate meetings with other professionals and gather and analyze the multitude of information that is required to develop a customized succession plan.
They can also help keep everyone motivated, as this is not a quick process!