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Passing On the Family Farm is Key Business Decision
By Jane Eckert
I’ve worked directly with dozens and dozens of farm families, and when start talking about the future of the farm, I too often see folks start looking up at the ceiling. Here are two or three generations working side by side, but they’ve never talked about who will own and run the farm when dad dies.
I encounter this all too often, and it really troubles me. We can invest endless hours and endless years in toiling over the farm to make it successful, but then risk that the whole thing will be sent to a probate judge and auctioned off piecemeal to the highest bidder. That’s certainly not part of a good marketing plan!
This article is primarily intended for the farms that have two or more generations working together, and where mom and/or dad have not clearly stated a plan for succession and transfer of property. Note: In most farm families, dad is the chief farmer and these are his decisions, so I’ll refer to dad most of the time, but I certainly am aware that most farms depend on mom and dad each doing their share to keep things going, and many women are also running farms.
So let’s get back to that plan of succession. I’ve read that as many as 65% of all Americans die without a will, and farmers certainly are no exception. Perhaps people don’t want to face their own mortality. More likely, they just feel they have plenty of time to get around to making those decisions. Well, we are going to die, and we don’t know when.
But let me also help you look at this from a marketing and business perspective. If you die without a will, most governing bodies give a third to a half of the estate to the spouse, and divide the rest of the property among the surviving children, regardless of age. That may or may not leave the right people in control of the business.
It’s time for every dad reading this article to realize that by not sitting down with your adult children and discussing the farm succession plan, you are actually sabotaging the future of your farm business.
When I consult and speak with farmers about what is important to them for their farm future I typically hear the same things:
- We want to ensure that we sustain the farm and stay in business.
- We want to be fair to all of our children and ensure harmony when we are gone.
- We want our grandchildren to have the opportunity to participate in the farm business in the future if they so desire.
Goal #1: Sustain our Farm Business
In order to ensure sustaining the farm business, it’s time for all the major participants to talk. I’ve heard lots of stories about the problems that result when dad dies without leaving a will. I’ve also heard about families where dad made a will, but he’s never told anyone how he plans on dividing the farm and the estate—a will exists, but the children have no idea how dad is planning to divide the farm.
I am not really talking here about young children; I’m talking about people who have been working with dad for ten, twenty or even more years. These are adults, and they want and deserve to know as much as possible about their future in the family business. They have put in plenty of sweat equity side by side with their father to ensure a good harvest and growth of the farming business. Likewise, their spouses have helped on the farm, or worked in town and hold the job that provides the family with health insurance.
You know farms like this. Dad maintains the purse strings and the business ownership, and he keeps his idea for the future a secret from the people to whom it matters the most. This style of management is not fair or equitable to the children and their families who want to commit their future to sustaining the farm business.
It’s time to call a family meeting, and sit down and talk it out. Should one person run the farm? Can the business be divided into areas of responsibilities or cost centers? How will decisions be made?
Goal #2: Ensure Family Harmony
That conversation, which may take weeks or months, will lead many families to another tough discussion. Most farm families past the first generation have some children working in the business, but there are other children who have pursued different careers and moved out of town. This is certainly an area that requires open discussion, and family harmony is not likely if siblings feel they have been unfairly represented.
If everyone in the family can agree that keeping your family farm land and sustaining a farm based business is part of your heritage, then deciding equitable divisions might be easier. However, if dad chooses to make all of these assumptions and ultimate decisions by himself without the input of the adult children, you are almost guaranteed to have someone feeling slighted or even worse, just plain angry.
On the one hand, some farmers feel that they have the right to make this decision without even discussing it with “the kids.” That may well be the way they came to be the head of the farm business. For most, passing the farm business to the next generation is very personal, it’s part of the family heritage. If some of the farm children share dad’s strong feelings for the land, it’s understandable to lean towards willing the farm to those who will continue your dream. Yet dad wants to be fair to all the children, and those children working off the farm might not have the same perspective as those who are working side by side with dad.
Family comes before the farm, and these conversations are essential to maintain both a healthy family and a productive farm business. Everyone should be a participant, and even if there are some strained relationships among family members, you all should sit down for this critical family meeting. The gathering should include dad, mom, all of the kids, and all of the spouses. Everyone should be part of the process, provide input or at least hear about what dad wants to do.
In some cases, particularly where some family members have chosen not to continue in the family business, select professionals may be able to assist you in discovering equitable ways to allocate the estates resources. For example, the family attorney or your insurance agent might have suggestions for a key man or a life insurance policy that would guarantee equitable distribution of the entire farm estate. But the bottom line is that family harmony can only be insured if everyone knows what dad has planned and is part of the process.
Goal #3: Provide an Opportunity for Our Grandchildren
Realistically, if we can’t create open communications among the family and establish a clear plan for succession, the farm business is far less likely to survive for the next generation. Once dad is gone and the siblings start squabbling and fighting over who is making the decisions and what decisions will be made, often the only choice is to sell the farm. Then no one wins. There is no family harmony, and the grandchildren have lost their future opportunity to become a farmer and work on the land.
Yes, most family businesses are uncomfortable talking about succession planning and death of a parent, yet this is a reality we all must face. If our goal is truly to sustain our farm business then let’s gather everyone around the kitchen table and start these conversations now.
Jane Eckert is the founder of Eckert AgriMarketing (www.eckertagrimarketing.com), a full-service marketing and public relations firm that helps farmers to sell directly to consumers, diversify operations and become tourist destinations. She is also CEO of www.RuralBounty.com, a search directory for agritourism farms and ranches in North America. Jane can be reached at 314-862-6288 or you may email her directly.