If you’re a part of a family farm, you know how essential they are to you and the global economy. Almost all of the farms in the U.S. are family farms, according to the U.S. Department of Agriculture. They also contribute just shy of 90 percent of the produce grown in the U.S.
Succession and estate planning can be difficult and emotional for many American farms. However, they are necessary for the health of the farm and the future of the family members involved. Families need to know what will happen when the leaders and decision-makers of these farms either retire or pass away. Lack of direction in transferring the family farm can make moving forward difficult for everyone involved.
Start discussions early
Children who grow up on a family farm likely have been doing farm-related chores for most of their lives. It’s not unheard of for a child to picture themselves being the boss who runs the farm one day. However, it’s important to remember that just because you’re in the family doesn’t mean you’re best suited to take over.
On Pasture pointed out that making these decisions isn’t easy and should take many years to work out. A few things that help along the way are:
- The next generation should get an education and life experience outside the farm through college or the military.
- The next generation should work on the farm as average laborers to get a good feel for full-time farm life. They should also learn the basics of running a farm operation as a business. This way, there won’t be any surprises.
- The parents need to provide a clear path to ownership, so children aren’t left in the dark about when or if they’ll inherit the farm one day.
Bring in a third party
In the world of family farms, it can be challenging to distinguish family from farm. When many relatives associate the family legacy with the farm’s success, stakes are high for a transition to go smoothly.
And when there’s that much pressure on a series of objectives and actions, it’s not uncommon for everyone to bring their diverging viewpoints on how future generations should handle the operation. A room of 10 people could be filled with ten conflicting opinions.
To ease the tension and help everyone get on the same page, Farming Life suggested bringing in a knowledgeable third party with expertise in family farm transitions and estate planning. This person will be able to listen to each family member’s opinions from a neutral standpoint and make recommendations on how to move forward. With a detached third party from the business, they can look at the situation objectively.
Planning out who will inherit the farm and all its responsibilities is hardly an easy discussion.
There are many examples of successful transitions between one generation and another. But there are also plenty of times when lack of communication or direction causes great strife between family members. Outside of family conflict, the farm, as a business, can suffer.
Don’t neglect to give your family a clear roadmap; careful future planning is never wrong. Contact Bank Midwest’s to discuss options for your farm’s future today.
Updated. Original post published April 2017.