A strong legacy component to a farming operation can often make choosing who will take over the farm a difficult decision.
Renee Wiatt, family business management specialist with Purdue University’s agricultural economics department, talked succession planning with RealAg Radio host Shaun Haney, as part of Farm Management Canada’s Agricultural Excellence Conference.
“Farming is a very personal enterprise,” says Wiatt. Part of Wiatt’s job at Purdue University is to help farms and farming families overcome mental barriers and be prepared to hand over a farm, once the plan has been made.
As Wiatt explains, there are three parts to the succession process: management, ownership, and the estate plan. The process can happen step-wise, concurrently, or one part at a time. Regardless of the order, it can take a long time for the whole process to be complete.
A partnership period, where one generation works closely with the next, isn’t out of the question. Ideally, Wiatt says successors start out as employees, progress to co-managers with the senior generation, then graduate to managers, throughout the succession process. The same goes for the current owner, or senior generation, in the reverse process.
Check out the full conversation with Wiatt, for more on the barriers to succession planning, story continues below:
Thinking about estate planning and transitioning ownership and management, Wiatt says that she encourages people to ensure the goals and objectives line up for the next generation, before going to see a lawyer.
“We really encourage communication within the family, before you’re sitting in that lawyer’s office and spending thousands and thousands of dollars working through conflicts, that need to be worked out at home,” says Wiatt.
Wiatt also emphasizes the importance of farms looking into an advisory board — made up of an attorney, an accountant, an insurance agent, the bank, or “the people you trust in your community that have your best interests at heart,” Wiatt says. Once you have that advisory board, she explains, have all those people at the table at the same time to come up with the best plan possible.
Research done in transition planning says it takes about seven years to transition a farm business to a family member, three to four years to transition to someone outside of the family, and a total liquidation of all assets can take a year to a year and a half, says Wiatt.
The earlier you have these conversations, the better. Why? Because the sooner you begin, the better chance there is that the farm can use all the financial tools available to make a succession work as efficiently as possible.