Farm Succession Planning

In other words if you took over the farm in 1963 the farm’s organization then – sole proprietor, partnership, cooperation, is most likely the same today. He also said that one of the greatest stumbling blocks for success when it comes to farm succession and planning - was the way it was originally organized many years before and never changed.

He explained that farms were typically organized as a sole proprietorship, a partnership, or a corporation of some sort based on the advice of their original accountant, attorney, banker, or successful friend. That was what these trusted people recommended based on whatever they knew about the situation them. And it had worked out.

He saw no reason for changing the way the business was set up, using the time honored approach, “If it ain’t broke…” from that moment on.

Twenty plus years later it is quite likely that the same organization is in place, unless an accountant had told them to make changes along the way to save taxes or their lawyer had them reorganize to address liability or other issues. Unless therer had been some immediate benefit or threat – they were usually still organized the way they were originally organized.

It’s also very likely that the next generation of has joined the farm and wants to share in its growth. In the 21st century no spouse worth their salt is going to commit to being part of the future of the organization unless they are sure their efforts will be rewarded. Or perhaps you want to give them “shares” in the organization now.

But no one knows how to do that. The senior generation has not spent any time considering the alternatives for shifting the growth to the next generation thereby rewarding their hard work and committment to the farm.

They hear rumors of how others have had huge battles for power and are now dysfunctional both as a farm and as a family. They don’t want this to be their legacy so they try to keep the subject at bay with, “someday this will all be yours” and try to change the subject.

They know of other farms just like theirs where everyone seems happy and in agreement about their plans for the future – everyone is on board with whatever has been decided and they are thriving.

Maybe they should get the name of their attorney, but no – that would mean they would have to admit to problems and tell this stranger the details of their family. Neither of these alternatives work well for them. It’s nobody’s business and anyway, “our farm is different.”

So they do what most of us try to do when confronted by something too painful to face up to, they take the wait and see approach and hope it will blow over. After all, when they were in their twenties (or thirties or forties) their dad’s position on the matter had been “Someday it’ll all be yours!” and that had worked out – as seen in perfect hind sight.

They had not been willing to rock their boat and their spouse had been willing (or so it seemed) to go along with the decree from above. They had waited and now they were the owners of the farm so the “wait and see” strategy might not be a bad one.

What they so conveniently forgot is how miserable, intimidated, and humiliated they had felt when they had to face their spouse after another unsuccessful ‘discussion’ with dad.

And you will never know, although you wonder about it from time to time, how much more successful financially everyone would have been if enlightened planning had been in place all those years between the day of that first discussion and when you actually assumed ownership.

You are probably wondering why people hesitate so when it comes to farm succession and planning. Why won’t they get on with it, take action and face the inevitable future – sooner rather than later. Why not take the bull by the horns and get started with the farm succession planning process and continue to prosper without any setbacks due to lack of planning or for that matter lack of communication.

In my experience the senior generation owners only knows what they already know or have heard about farm succession and farm estate planning. Unless they have been through it before recently they don’t have any clear cut workable ideas on how things can or should be done.

Their existing advisors only know what they know. Their expertise may be limited to the way they’ve always done things and they may not be open to suggestions or welcome the input from others, no matter how well intentioned.

Because the senior generation is considered successful by the people in the community, because they are called upon for advice of all sorts from everyone, and because they have a position of influence in their industry – they don’t want to appear dumb. They’d be embarrassed to have to ask anyone anything that someone in their position should know.

I know that seems impossible – but it’s true. We often fear being embarrassed in front of others more than the results of our inaction.

So the natives (maybe that’s you or your son, daughter, or brother) begin to get restless, probably because of their spouses. The talented begin looking at other opportunities. The competent begin considering their options. The no-so-competent become the next generation successors by default. It would never occur to them to question the authority of the boss. Plus where else could they make as much as they’re likely to make here?

But it doesn’t have to be that way.

You probably get together with your successful peers from time to time at an association event. Perhaps you speak on the phone with them semi-regularly. Maybe you have even part of a dealer council or a group put together by your farm association.

When you connect with your peers randomly or by accident you’ll never get the full benefit of their knowledge and insights, so why don’t you take it to the next level?

Create a strategic conversations group over the phone where, among other things, you can discuss the farm succession and planning issues you’re facing. Your peers will have dealt with these farm succession issues before, or know someone who has, and they’ll probably see other stumbling blocks that are invisible to you, along with their solutions.

Whether it’s farm succession or general business planning your peers will confront your assumptions giving you a chance to examine them clearly before taking action.

And they have no axe to grind, nothing to sell, and no past advice to protect – so the well thought out conclusions that result will have to be considered seriously by your family and your advisors.

As you can see, farm succession planning is a process, one that does not have to be complicated unless you make it so.

The fact is that you and only you have the power to make the succession and planning decisions necessary, you alone have the authority to make the decisions required and you alone are responsible for the outcome of your succession and planning process, whether they are the result of thoughts, conversations, and negotiations or by luck or misfortune.

If you are serious about farm succession, or if you are a professional involved in farm succession planning – or an farm association executive whose members desire to see their farm continue into the next generation, you are in the right place!