Farm Succession Planning: 7 Suggestions
The family farm. It’s your agricultural legacy and your American dream. And it means everything to you. Passing that dream on to the heirs and the people you trust to inherit it helps ensure your hard work continues to provide for generations.
Farm succession planning plays a key role in securing your legacy. It’s a detailed, sometimes emotional, process. But when the right people are involved and the right conversations take place at the right time, it can be a positive experience that strengthens relationships and protects dreams. These future operators and stewards of the land you’ve worked so hard for can benefit from a detailed plan that leaves nothing to chance.*
What Is Succession Planning for a Farm?
A farm succession plan is a transition strategy to pass on your farm to heirs who will continue running the business of your agricultural estate. If your strategy includes handing off your farm to your family’s next generation, you’ll want to prepare those family members and business managers for success by planning ahead today. That’s why having a complete farm succession plan in place is so important.
Farm Succession Plan Considerations
Take a look at the suggestions below to help build a farm succession plan you can feel good about:
1. Detail your plans and team members now
The earlier you start your plan, the more time you give yourself to make smart decisions and include the right people. You’ll avoid rushing through any important steps. And by taking the time to assemble a transition team to manage your farm’s day-to-day operations after your departure, you’ll be helping to ensure the changeover is handled smoothly. Here are a few key considerations for your transition team:
- Have contingency plans in place to manage events that could interrupt future ownership and your succession plans
- Consider the costs and benefits of a transition plan, where your operation’s responsibilities shift to heirs over time
- Designate managers, business and estate attorneys, key transition team members — and detail their roles and responsibilities
2. Address important farm management team questions
Multi-generational succession plans best accomplish their goals when difficult questions are asked and answered in advance. They may not be easy questions, but having these details thought out before something happens can make a world of difference when you’re no longer available to make key decisions. Here are some of the questions to consider:
- If you pass away suddenly, what happens next to your operations?
- What can you do right now to help develop management skills among your designated heirs, to help assist with a smooth transition?
- How should routine, annual evaluation of team members and your estate attorney occur to assess their strengths and weaknesses?
- How can you cross-train key members now to best understand your business?
3. Set goals, and stay committed to your succession plan
An effective farm succession plan doesn’t happen overnight. It’s a process that requires the commitment of every person involved at every step. Knowing that up front will help keep members engaged.
4. Communicate with farming heirs clearly
Open and honest communication is the foundation of any effective succession plan. Talking through the concerns, dreams and assumptions of everyone at the table — from family members to your estate planning team — will go a long way towards preventing any misunderstandings.
- Discuss with heirs and managers their interests or roles in the business
- Keep accurate corporate stock and share percentage records for member
- If labor and sweat equity can potentially translate into financial rewards, consider defining how rewards can be gained
5. Use estate law experts to help protect your assets
Succession planning can get complex. There are tax implications, financial strategies and real-life relationships to think about. By involving estate law professionals during the planning process, you can help ensure your plans are precisely executed in the future. Consider building a team that includes an attorney, accountant, financial planner and your American Family Insurance agent among others. With expert guidance you’ll be on a better path to a successful transition.
6. Document the ownership plan in writing
It might seem obvious, but having your ownership plan in writing is a very important step. Consult with your estate attorney to designate. Outline the details of who is to inherit what, when it’s all going to happen and the processes required to achieve it.
7. Review and adjust your phased succession plan annually
People and circumstances change from time to time. It’s likely that your succession plan will, too. So, be sure to review your plan and life insurance beneficiaries annually, and adjust your phased succession approach as necessary to match any changes that have occurred in the interim.
- Modify your plan to account for retirement compensation in accordance with your operation’s current profitability
- Revisit your future living expenses and accommodations each year
- Continue to pay into social security when receiving compensation
- Adjust your compensation annually according to your current roles and responsibilities vs. those projected in your succession plan
It may seem like a lot, but it won’t have to be overwhelming if you approach your succession plan carefully. With the right guidance and support, your beneficiaries may be able to inherit a thriving operation because your plan is well-designed and adaptable to change. Most importantly, you gain peace of mind with the knowledge that you've protected your farm and its future.
Consider Life Insurance With Us
While you’re making plans for the future of your farm, be sure to check in with your American Family Insurance agent. They can help you select a life insurance policy for your family and your children’s future, too.
*Neither American Family Life Insurance Company nor its agents are authorized to give legal or estate planning advice, and this article should not be construed as such advice. Customers should consult an attorney or estate planner for answers to legal and estate planning questions.
Related Topics: Farm Succession Plan