Generational Farming: Passing Down the Farm
So, your farm is a multi-generationally ran farm. However, right now the farm is owned by someone in your family who is part of the over 50% of farm owners over the age of 55. Now that they’re getting a little older, they’re ready to pass the farm down to the next generation. However, they are unsure of the best way to go about doing this, and have no idea of how much it will cost to do so. This is the dilemma that my family and I have been facing. Here are some tips and resources that we’ve gathered and used along the journey of passing down our farm.
First, realize that this transition from one owner/manager to the next isn’t going to happen overnight. Most farm transfers are well planned out and take some time, usually at least a few years, for the transition to happen. With our farm, it’s already been a few years and the actual ownership of the farm still hasn’t been transferred over, but the planning for it has been well in the works. What I mean by that is that my grandparents have had in mind that they wanted my uncle to take the farm over when the time came for as long as I can remember, and everyone else has known and accepted that. We don’t mind as long as we can still be a part of working on the farm.
With that knowledge in mind, my grandpa has worked hard to try and ensure that my uncle has learned as much from him as possible in every aspect of running the farm, so when the official ownership transfer happens he will be more than ready to run everything as the sole owner and main manager. This is the number one piece of advice that we received. Don’t just try and hand everything over at once, phase the person who’s taking over the farm into running more aspects of the farm slowly over time. Do this by setting up a farm transitional plan, and make sure that all parties involved in the transition understand all that is included in this plan and agree to all aspects of it.
In general, state extension services tend to have great information that you can check out to help you create a transition plan specific to your needs. One great resource that I’ve found useful is a free website called AgTransitions. It was created to help farmers develop a transition plan that will work best for them and their family.
One piece of interesting information that my family and I learned is that if the owner of the farm is planning on putting their farm in a trust (which is often done in case something was to happen to them and they had to prematurely go into assisted living or a nursing home), that trust does not apply unless it has been established for 5 or more years, at least in the state of Minnesota. We found out this interesting piece of information through consulting with an off-farm advisor. When you’re making these transitional plans, and if you are considering things such as leaving the farm in a trust or will for the time being, it’s best to have an off-farm advisor to consult with. They can really help you by giving you more information regarding anything law-wise or even just regarding financials. There are plenty of Agri-Business services out there that specialize in things such as preparing to pass down land and livestock, and they are super easy to find. All you have to do is google agribusinesses that deal with farm transfers, and you can find links to businesses in your area along with reviews from previous customers. You should also consult an attorney to finalize any trusts that you decide to put the farm into, so that you are completely covered.
One last thing to consider is if your farm is financially in the best place to start this transition process. If the farm is not going to be able to support the generation that is currently running it so that they can afford to retire as well as support the generation that is set to take it over, this could lead to financial issues for all who are involved in this transition. If this is the case, consider what ways you can make the farm more profitable before starting the transition.
For further resources and information on all things that need to be considered and financial planning, consider checking out Iowa State University Extension and Outreach’s Transition and Estate Planning files.
While a farm might be currently multi-generationally ran and everyone seems to know a lot about the farm, that doesn’t mean that a transition of ownership and management will be easy and can be done fast. There is a lot that needs to be considered for a transition to go smoothly and result in all parties being satisfied with the outcome. My family and I had no idea that so much should go into such a transition, and I feel that this is a common trend among many farm families. I recommend reaching out to your local extension services and allowing them to help you create a solid transition plan that works well and is specially created for your family and then take that plan to an attorney and/or an agri-business that can review this plan and help you finalize it. Creating this plan will allow this process of transition to go much smoother for all involved, and remember that this process will take time so the sooner you start it, the better.