Written By: Dr. Alex White
Last month I made a bunch of sarcastic (and not so sarcastic) comments to get you thinking about your future and your family’s future. Hopefully you’ve started thinking that transition planning might be worth the effort.
A little bit of planning might help preserve your family farm or business, and more importantly, it might keep your family together. So what’s the next step?
Try to determine the goal of your transition plan. When you boil it down, there are basically 5 main options when it comes to transition planning for a family farm:
- Keep the farm in the family – this option refers to the goal of the family to maintain ownership of the farm whether they are actively farming or renting out the land.
- Keep the family in farming – this option tries to keep the family farm in agricultural production either by keeping the existing farm in production or selling it to purchase a farm with better resources.
- Chain the family to the farm – unfortunately, many times the transition plan forces someone in the family to remain on the farm, whether that farm is profitable or not, or whether they want to or not. Open communication is critical!
- Keep the family from farming – this situation usually comes about because the older generation wants to treat their heirs equally. While you don’t want to show favoritism, usually, this option leads to intra-family arguments over the future of the farm. There’s a difference between treating your heirs equally and equitably.
- Sell the farm –what is the difference between a “good sale” and a “bad sale”? A “good sale” occurs because it is the best course of action for the family and it meets everyone’s goals. A “bad sale” occurs when the farm must be sold against the will of at least one of the family members. Unfortunately, “bad sales” are often the end result of Option 3 and Option 4.
Once you’ve determined which of these options is best for you and your family, here are a few more steps to get the ball rolling.
- Start the process when you have the time to devote to it
- Decide to take action and start as early as possible.
- Develop a transition management team (i.e financial managers, accountants, lawyer, estate development guides)
- Set up a timeline for the transition
- Develop a written plan (both a business plan and transition plan)
- Accept the fact that transition planning is an ongoing process.
Stay tuned for part 3, we will go into these steps in much more detail. I’ll try to address major issues involved in transition planning, including legal forms of organization, written job responsibilities, intra-family communication, retirement planning, and estate planning.
Dr. Alex White, Virigina Tech Dairy Professor