Family Farm

What Is a Farm Succession Plan?

Updated September 3, 2016 . AmFam Team

A farm succession plan is the process of passing on the ownership of your farm to another person, typically a family member — and it’s essential to the success of your farm’s future. Learn more about the importance of your farm succession plan and how it can help prepare you for retirement.

You’ve worked hard to build your farm into a successful business. And leaving the future accomplishments of your hard work to chance isn’t an option. That’s why a farm succession plan is a critical part of passing your farm down to the next generation. With appropriate preparation and planning, you’ll be ready to turn the reins over to your successor, which may be your children or grandchildren, when the times comes.

Definition of Farm Succession Planning

Your farm or ranch is your legacy, and you probably want that legacy to continue when you no longer can run the farm yourself. Farm succession planning is the process of passing on the ownership of your farm to another person — typically to the next generation of your family. Having a succession plan in place makes that transfer as smooth as possible and it’ll help determine the future of your farm.

What to Know about a Farm Succession Plan

Ideally, your farm succession plan will help you reach your financial goals upon retirement, so your plan should include the amount of income you and a spouse will need for your retirement. It’s important to calculate this number to help you determine what obligation the business has for you as a retiree in order for your business to not be adversely affected financially.

The success of a farm succession plan requires a developed, thought-out strategy for the transition. An important decision you’ll make is choosing what to do with your farm. Consider the following for your succession plan:

  • Transfer time – determine when and how long this transfer process could actually take and the time to share knowledge and shift responsibilities of managing the farm business.
  • Good communication in these arrangements is a vital link in the success of the farming business.
  • Farmers commonly transfer or sell ownership to a family member or members. For non-farming heirs, consider leaving them with equal settlements of money, stock or other assets.
  • Instead of completely handing over ownership, you can rent or lease your land and equipment.
  • You can sell or contract your property to non-family members.
  • Carefully liquidate your assets by auctioning equipment, livestock or selling your land.

What Do You Want Out of Your Farm Succession Plan?

The right plan helps protect your farm by ensuring everything you’ve worked for stays in the right hands. It’s far more than a financial arrangement. It’s a roadmap for growth and security. But the right plan takes time to develop. It’s a process that’s unique to every farmer and every family. And it all starts with honest communication and trust.

Ask yourself these questions to help you determine what you want to get out of the plan.

  • Do I want the farm to stay in the family?
  • If the family member is taking over the operation, am I confident they have the knowledge and skills to keep it running?
  • Do I want the farm to remain operational after the transition?
  • Do I want to stay involved in business decisions regarding the farm after the transition?
  • What kind of income will I need for retirement and health care costs?

Open communication is key for an effective succession plan. Thinking about these questions will help you have a better understanding of what you want, so you can clearly talk through your concerns and expectations with your family or people involved to help prevent misunderstandings.

Transferring Ownership

Maintaining your farm is an intricate operation, and transferring ownership isn’t quite as easy as handing over a set of keys. When it comes time for your successor to take over, you’ll want to have these important details figured out.

Land. Now that you know who you are transferring ownership to, how will you do it? Will you be gifting your land to your family members or selling it? Transferring ownership upon death is also a common option because you’ll still be able to use your property and earn income from it throughout your retirement years.

Equipment. Are you going to sell your equipment to your successor or transfer ownership to them? You can also choose to lease your machinery to your successor, but make sure to agree upon who will pay for repairs.

Breeding livestock. Transferring your livestock can also be done in a number of ways. If you have breeding livestock, you can choose to sell all or a portion of your herd with payments made in installments. Or, go the roll-over route, where you’ll still own the breeding herd and share joint ownership of the offspring with your successor.

Feed and market livestock. You can choose to sell or give your feed and market livestock to your successor. If you go this route, make sure you’re doing so at the low point of the feed inventory or between the sale and replacement of the market livestock. You can also choose to have your livestock inventoried, meaning you’ll receive the inventory value of the livestock upon its sale, and you’ll divide the remaining proceeds between you and your successor.

Before making any definitive decisions, be sure to consult with a tax professional to understand the tax implications of your transfers.

Assemble Advisors

Strategically planning the succession of your farm takes time — and the right guidance. Actively involve your lawyer, accountant, financial planner and your American Family Insurance (Opens in a new tab) agent to help you build a successful farm succession plan. Though your family will probably be heavily involved with the decisions, having unbiased perspectives can help neutralize conflicts that may arise.

In creating a farm succession plan, you’re able to implement your family’s vision and intentions with purpose. You want to ensure that your farm continues operating with adequate economic capabilities to financially support multiple generations for years to come. Ready to protect the future of your farm? Use these seven steps to build a plan you can feel good about.

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    Enhance Your Farm's Digital Presence

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    What content are you putting on each platform?

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    Who is your audience?

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    Building a Website for Your Farm

    Now that you have a better idea of some digital basics, let’s put that knowledge into practice — starting with your website. The internet is a powerful tool to market the product(s) your farm produces, and creating a website is a key way to harness its potential. Follow these guidelines for website best practices:

    Set goals. Spontaneity has its time and place, but building a website to market your brand isn’t the situation to jump in without a plan. It’s important to set realistic, achievable goals for round one of your website. Keep in mind, your site is a work in progress and can be improved upon in many iterations. Consider what you want your website to achieve. Are you selling products? Do you offer a CSA? Do you want to educate people on agriculture? Maybe you’ll create a gallery to show images of the fun you have on your farm. Take the time to sit down and list out a few goals for round one. With your plan in place, it’ll make the next steps that much easier.

    Creating the website. You’ll need to decide if you want to hire someone to create your website or if you plan on crafting one yourself. Many sites exist that make it super easy to create and maintain your own website — and most of them are even free to use! If you choose to have someone develop a website for you, make sure it implements a content management system so you can update the site yourself. This way, you can easily keep things relevant without always having to go back to the designer (and pay them) to make changes.

    Provide a clear description of who you are. If someone stumbled upon your website, would they be able to identify who you are and the purpose of your farming business within a matter of seconds? That’s your goal — create a homepage that’ll attract and retain your customer’s attention so they’ll stay on your page. Make sure the name of your business stands out and a summary of your products and services is included.

    Clear navigation. In order to guide your customers to discover all the great things about your business, you’ll want a navigation menu with clear links that lead to your pages. A dropdown menu offers an easy way for your visitor to see all that you have to offer, no matter which page they’re on. You’ll ultimately decide which pages you want on your page, but home, about us, newsletter, calendar, contact us, links to your social media pages and other important services you offer are common pages to include on your website. Remember, your pages will align with the goals you set at the beginning.

    How to Create a Farm E-Newsletter

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    So what should you know about creating an e-newsletter? Start with these three tips:

    Newsletter content. A good rule of thumb to follow is to include content that’s 90% educational and 10% promotional. Chances are the person who subscribed to your e-newsletter wants to get to know your business better and continue to stay informed — not be pushed to buy something. Providing educational, relevant information builds trust between your reader and your business. Here are some ideas for content you might include:

    • Whether you sell meat or vegetables, recipes are a fun way to mix your product with something useful to the consumer. It may even encourage a customer to buy your product.
    • Life on the farm isn’t something everyone gets to experience. Include a fun story about how your farm runs or an anecdote about your animals. This way your reader can vicariously experience farm life.
    • Is your farm open to the public? Include visiting hours, what they can expect to experience and any upcoming special events.
    • If you offer volunteer opportunities, include how to volunteer and/or a testimony from a previous volunteer.
    • Will you be at a farmer’s market or farming expo? Be sure to list anywhere you plan on appearing as vendors.
    • Reward your subscribers with a discount or coupon every now and then to show you appreciate their business.
    • Is there something unique about your farm? Let it be known!

    There’s no end to the content you can include in your newsletter, but most importantly, make sure it’s relevant and have an understanding what your reader is looking for.

    Newsletter design. A newsletter can be sent by mail, email or included on your website. Our suggestion is to send your subscribers an email as well as include a web page for your newsletters on your website. That way non-subscribers can view the newsletter and hopefully become subscribers! Here are a few things to keep in mind for the layout of your newsletter:

    • Create a header at the top of the page that includes the title of your newsletter, your company name and logo.
    • Use subheadings to organize and break up the pieces of content. A subhead should be smaller than your main heading and bigger than the text you use for your content blocks.
    • Choose a color scheme. If you have a brand logo, defer to those colors.
    • The legibility of your newsletter is very important, so stick to one or two fonts, since too many fonts can give a disorganized look.
    • Have a balance of images and text. An image grabs a reader’s attention and offers a visually appealing element to your newsletter. It can be used to break up the page so as to not overwhelm the reader with too much content.
    • Don’t create a five-page newsletter. Keep it to a page or two. The newsletter is designed to provide quick, digestible information that grabs your reader’s attention.

    Newsletter frequency. How often should you send your newsletter? Most people choose to send a weekly, monthly or quarterly newsletter. It all comes down to your own personal goals and what your business offers. If you have a lot of events happening on your farm or are very customer-focused, sending a weekly newsletter is a good idea. If you don’t think you’ll have much time to put into a weekly newsletter, go for the quarterly and make sure to spend time filling it with all the great things that have gone over the last three months. A monthly newsletter is a good, doable balance for busy farmers who need to keep their customers updated but don’t have a lot of time.

    Just remember — your newsletter is meant to attract your target audience and give them a reason to stick with you. Do what’s realistic for your business and have fun with it!

    Social Media and Your Farm

    Facebook, Twitter, YouTube — just a few social media platforms you can use to easily promote your farm. And they are pretty simple to set up and maintain! Our advice is to focus on building out your presence on one platform and slowly work your way into creating more accounts once you get the hang of marketing through social media. Here’s a closer look at some great ways you can use social media on your farm

    A thought-out, well-run digital presence can benefit your farm in many ways. With the right goals and strategy in place, you can give your farm a digital edge. Your next steps? Go dig around the Internet and do some research. What kinds of farming websites exist? What kind of information do other farms include in their e-newsletters? Start following some successful farm’s on social media. Take a look at what already exists on the web to gain ideas on what might work or not work for your own strategy.

    Remember — it’s all about knowing your audience and what they’re looking for. At the end of the day, it’s about making your customer happy.