Many of our farms in Ohio are family operated and owned. There is also a considerable expectation that the next generation will someday take over the family farming operation. This article will not address the specifics or offer a multi-step farm estate plan, but instead offers some general considerations.
How will the farm management and ownership be transferred? The transition of any business, farms included, does not happen smoothly without considerable planning. Re-working a will, setting up an LLC, or forming a trust, etc. for how the farm will be transferred to the next owner/manager can be costly and time consuming. But having a plan may be one of the largest blessings a current farm owner can leave for the next generation.
Beyond just having documents like power of attorney, a living will, a life insurance policy, etc. make sure people know where those can be found when needed. These documents are not helpful if someone else does not know the document exists or where to find it. I spent a lot of time recently tracking down such documents for a friend. Unexpected situations arise and life is fragile. Please do not think these hard conversations and decisions can wait until another time.
Family farms are rather unique businesses. When your family members are also your co-workers, boss, or employees, having those split roles can be a challenge to balance. In addition, most family farms are not big enough to support all of the next generation and their families, so difficult questions arise about fairness. More on that later.
I have heard numerous horror stories from various farmers, extension educators, and agricultural attorneys about a farm owner passing away suddenly, being admitted to a care facility, or other dramatic life circumstance and no plan was ever put in place to carry out the wishes of the farmer in such a situation. This places undue stress and obligations upon those left behind to make decisions for them. These scenarios often result in damaged family relationships, unexpected legal expert fees on top of funeral and/or medical expenses. Farms without plans may end up being sold and the proceeds distributed (maybe equally) among the beneficiaries. And you thought the family Thanksgiving dinner was awkward before…
For the senior farm owner(s), do you have a plan for retirement? Retirement usually looks different for farmers but having a plan on how you will be financially supported is key. Whenever possible, setting a little money aside in some sort of retirement account or other investment should at least be considered. As mentioned earlier, many farms are only big enough to support some of the family members, so when senior farmers decide to retire, they can free up a lot of the farm income to support the next generation and the farm operation if farm income does not also have to function as “farmer’s social security.”
Communication throughout this process is critical for the best outcome. Transition plans can only be carried out efficiently and to the wishes of the owner(s) is communication of those plans is happening. Of course, there is potential for conversations about the farm’s future to be awkward and for feelings to be hurt in the process. Finding a fair way to divide a farm is challenging. However, family relations are sure to be damaged when those decisions are being made after the owner’s passing during a grieving period and when expectations and plans for that farm were unclear.
Perhaps the toughest question that the senior farming generation must answer and what the junior generation wants to know is “what is fair” when it comes to dividing up farm assets. Things to consider include: farming children versus off-farm children, how many families can the farm support, if there are no children interested in the farm will you transfer it to someone else, should the farm be sold now, and the list goes on.
While watching a farm transition webinar the other day, the speaker addressed a common perspective that causes a lot of stress to farm families in transition. His point was that a family decision to transition away from farming (selling the farm) should not be classified as a failure. It is a decision. If necessary, consider which has higher value- the continuation of the farm or the cohesion of the family.
OSU Extension has online resources that may be helpful for taking the next steps in the decision process but cannot offer legal advice.
Matthew Nussbaum is an OSU Extension Agriculture and Natural Resources Program Assistant and may be reached at 330-264-8722.
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