Family farm and the big transition

Life transitions can and are most of the time a hard pill to swallow, especially when you are the one aging or giving up your life-long work. Keeping the family farm or ranch in the family is the ideal situation or hope of most producers. So, if you will be looking at transitioning part or all of your farm/ranch to your children, start planning now so that you have a seamless final transition later.

There are ideas and how-to articles out there to reference on what to do and how to transition to your kids. Ultimately, the timing is up to you as a family unit. Ask the questions…when do I want to retire and what will that look like? Which one or will all of my kids want to ranch? Is our farm large enough to provide for their families? Sometimes the answer is bringing non-related parties into the farm, either due to lack of interest from children or one has no children to pass it on to, but still want it to be run as one place and not subdivided.

What does retirement look like to you? Family farming/ranching is a business that most grow up learning to do by helping and working alongside their parents. Making a conscious effort in starting the training process early and with intention is crucial to a timeline on transition to retirement. This will depend on where your business life cycle is and where it needs to be at the time of transition. This way as the kids get older, you will be able to recognize their strengths to focus on in the training process.

As the years go by and the kid grows up, they will have new perspectives and ideas to bring to the operation. Be open to new ideas even if you do not implement them right away.

Where to start? Accountants, insurance agents, estate planners and lawyers are good people to bring in. After consulting with professionals, sit down with the family and go over the steps it will take, yours visions, and any conflict resolution solutions. Be honest and upfront about the financial ups and downs you have experienced over the years and where you are right now.

What is the farm’s potential and are there new things you would like to see implemented? Sometimes new things were not done because of finances. Bringing in new and young farmers or ranchers into your operation can open up new funding opportunities to obtain that goal or vision. This could be a good time to transition the management of the farm/ranch while still being involved in day-to-day operations.

What transfers first? Generally, the everyday labor is the first step in transitioning out. In this transition you can decide to pay with cash for the work being done or you can trade labor for shares or equity in the farm. Be sure that this is agreed upon at the start of this process and that you are all on the same page on how much labor a share may be worth. If there is cash readily available for wages you can do it that way also.

The transferring of management may be the trickiest. If this is not established on your transition timeline, it could cause conflict. Having faith in your training and who you picked with the management strengths will ease you into the transition.

If you do not feel they are ready and need more time, they may rent or lease a piece of property to operate themselves. This will help them learn, and will also show you they have what it takes to take on the whole operation.

The last piece of the transition puzzle lies in the transferring of assets. There are many ways to go about this process. Machinery can be transferred one piece at a time, as a straight sale, gifted, or lease to own. Livestock should be transferred at the end of the fiscal year and generally when inventory is low and can be sold in groups or as a whole.

Land transfers are similar to machinery in that it can be directly sold, gifted, and/or leased to own. There are various funding options and tax credits for land a young farmer can take advantage of through USDA, Department of Agriculture and local FSA offices. Contact your local Agriculture and Economic Development offices for any assistance needed throughout the process.

Alissa Miller is the Food and Agriculture Assistant with Eastern Plains Economic Development Corporation. Miller’s office is located in Baker, serving the counties of Carter, Fallon, Wibaux, Dawson and Prairie Counties. Miller is there to help with grant writing, business planning, training, agritourism or farm to school programs. If you have food and agriculture business or training ideas call or email her at (406) 852-3735 or [email protected].