A FarmLife Special Report: Passing on the Farm

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“We often hear the famous phrase, ‘One day this will all be yours,’” notes Heather Watson, executive director of Farm Management Canada, a national organization devoted to assisting farmers with management decisions. “It makes it sound like succession is just a waiting game, not a long and complicated process.”

Indeed, for many farmers the idea of embarking on such a complicated process—passing on farm land, know how and equipment—can be overwhelming, which helps explain why many farmers often avoid the topic, according to Watson. Other reasons for postponing succession planning include lack of understanding about the process, insufficient time, fear of conflict among families, an unwillingness to ask for help and concerns over costs. 

Yet, one of the biggest reasons farmers avoid succession planning is a fear that it signals their exit from the farm is imminent—a concern that is often unfounded, according to Dennis Stein, farm management senior educator at Michigan State University. “Succession planning isn’t about setting a specific date to turn over the farm,” he says. “It’s the process of thinking about the steps [to complete the transfer] and helping the next generation develop the skills to run the farm.

“Farming operations have gotten a lot bigger and more sophisticated,” Stein explains. “If a farmer wants to pass his farm to the next generation, he has to think about the process of transferring operations and assets; it’s not going to happen with a promise and a handshake.”

Gary Hachfeld, Extension educator at the University of Minnesota, encourages farmers to think of succession planning as an ongoing process, not a one-time exercise. “You don’t hand over a multimillion-dollar farm business overnight based on a document that was drawn up years ago,” he says.

While the succession planning process varies from one farm to the next, the process might require creating an estate plan and transitioning to a different business structure (from sole proprietorship to a joint venture or S corporation, for example) to facilitate the phased transfer of ownership of land, livestock, equipment, labor, operations and income.

Regardless of the paperwork involved, farmers should be willing to take a hands-on role, ensuring the next generation is prepared to take over the farm. “Turning over the management of the farm, in particular, takes time and mentoring should be built into the [transition] plan,” says Hachfeld.

“Farming is such an uncertain business,” Watson notes. “A succession plan helps remove some of that risk and protects the farm for future generations.”

For more on succession planning, including a case study, visit myFarmLife.com/pass. If you sign up for the FarmLife email newsletter, you’ll get instant access to the exclusive, FREE eBook download, “Guide to Succession Planning: Passing on the Farm.”