How to transition your farm to the next generation
Most families who have farm or ranch operations have worked hard for many years to ensure the financial success of their business. A big part of many farm business plans is the prudent management of land based assets.
Handing over the responsibilities for these assets from older generations to younger generations can take many years. It’s a complex process and often requires much thought and planning ahead of time to ensure a smooth transition. If done correctly, a wonderful legacy can be left to future generations, providing them with a wonderful lifestyle – and a source of income from the agricultural business as a whole.
If your family is in this stage and working to transition your farm, ranch, farm land, or other operation to the next generation — you may be wondering where to begin. Here’s some steps you can follow to help ease the process along.
Step 1: Answer the important questions with family and employees
An honest conversation with all interested members of your family as well as key business personnel is obviously a must. There will be many important questions to answer, such as:
- Should the ranch or farm be kept running in general?
- Is there a more profitable use for the farmland, such as development or an alternate agricultural use that would ultimately provide more value to your family?
- Are your next of kin capable of managing the operation, and even more importantly, are they interested in running an ag business?
- How would marriage, divorce, or other significant life change affect the ownership and management of your land?
- What might the operation and family dynamics look like 10, 15, or even 20 years from now?
Step 2: Financial & legal concerns are a key part of farm business plans
During this step, you can review the assets and revenues from your farm or ranch operations to ensure that your younger generation can tap into the value over the years.
You should also make sure that all the legal documentation is in place, reviewed, accurate, and up to date. This can include wills, trusts, and business agreements such as partnerships.
Step 3: Insurance and liability
Finally, it’s crucial to review any life insurance and/or liability policies that you have in place. There are benefits of reviewing these insurance policies, such as providing valuable liquidity during the death of an older family member. It can also help to minimize the risk of a catastrophic loss as much as possible for the future generation.
If you’re looking for further advice on passing down your agricultural business to next of kin or a new generation, reach out to your local financial advisor and legal contacts to make sure you plant the right seeds for your operation’s future growth!