No matter how well-planned, farm succession is difficult. The “family” concept is often emotion-based, especially regarding the issue of treating children equally.

Joy Kirkpatrick, farm succession outreach specialist, University of Wisconsin-Madison, has some tips for making the process smoother.

One barrier to succession planning is that families may not know the financial capacity of the farm and don’t know whether bringing in another generation will meet everyone’s needs. Many don’t know how to start the succession conversation, which makes it easy to put off planning.

Several areas of the succession process can lead to tension. A big segment of a farmer’s identity is their occupation, resulting in difficulty letting go of ownership and decision-making responsibilities.

Another issue is the concept of fair vs. equal. If there is more than one child, or if there are both on-farm and off-farm children, how are the older generation’s assets distributed? Kirkpatrick noted most families have this situation and must discuss the options.

The next source of tension is profit vs. affordability, and whether the farm large enough to meet all needs. If there’s development pressure, selling the farm means immediate financial gain for the older generation. Kirkpatrick urged families to think about family goals and the price of those goals if the farm is kept in the family.

There are also actual conversations vs. assumptions. “It’s about communication and being clear about what you want to happen,” said Kirkpatrick. “Transparency around financials is often a struggle for farm families. It’s hard for the older generation to share the financials of the farm. It’s something they may not feel comfortable doing because their children are involved and perhaps there were less than great years.”

The last tension issue is progress vs. continuity. In some cases, a young person is returning to the farm after college or working on other farms. “They want to know that the decisions they’re making make a difference,” said Kirkpatrick. “They’re excited to have the opportunity to see progress from their own decision-making.”

However, the older generation has a lot of experience and may say “We’ve always done it that way.” Kirkpatrick encouraged the younger generation to think about how their elders have made good decisions over decades that have allowed them to arrive at succession planning. The younger generation may want to make uncomfortable changes, but the family should consider changes in some management aspects as the farm continues under family ownership.

Kirkpatrick also outlined three forms of assets: retirement, business and inheritance. For retirement assets, the older generation is focused on making sure the business is growing and being maintained.

Regarding business assets, if there’s a successor who has already been a part of the farm, there may be an unspoken promise made to the successor generation that they would have access to assets and be able to continue the business.

But “access doesn’t necessarily mean ownership,” said Kirkpatrick. “There should be plans put in place so if they need access to assets, they can.”

Consider whether inheritance assets must be equal. Kirkpatrick stressed the importance of having clear and transparent communication, and sometimes uncomfortable conversations, to ensure everyone understands the goals and how the plan might take place.

Kirkpatrick described the “Golden Rule of Family Baggage.” “Unless there is deliberate intervention, any conflicts, tensions, disagreements or dysfunctional patterns that exist in the family environment will be brought into the business environment,” she said. “Think about how you interact as a family and improve that as much as possible because it will affect the business. Think about communication patterns and personality styles that can cause friction.”

Universal conflicts include different goals from one generation to the next, and sometimes within a generation siblings return to the farm with different ideas about the operation’s future. Scarce resources are a concern, and this topic involves business financial analysis and whether the farm is big enough to do what the family wants it to do.

“Before you get to the conversation about ‘someday this will all be yours,’ make sure you have financial documentation that says it can happen,” said Kirkpatrick.

When faced with conflict, most families “keep calm and farm on,” focusing on more comfortable operational decisions rather than bigger strategic planning. The planning process forces people to face their mortality and raises unpleasant family issues including the inability to choose among children to become decision-makers. Many families find themselves too busy with day-to-day tasks to work on succession planning or put it off for fear of losing their identity.

“Because of this, businesses continue to choose the least logical, most costly and most destructive but most popular strategy,” said Kirkpatrick. “That’s the ‘do nothing’ strategy. How can we encourage people to think about starting these plans?”

Because succession planning can be uncomfortable, people simply don’t talk about it. “Acknowledge the elephant in the room,” said Kirkpatrick. “There are lots of uncomfortable, emotional topics that many farm families would rather not discuss. The elephant is not only in the room, it’s invited to the table.”

She outlined a three-step process for navigating the messy middle: Where are you now, where do you want to be and how do you get there?

“For ‘where are you now,’ be prepared,” said Kirkpatrick. “Have things written down – the history of the farm, the people who are part of it. Include family information, what’s already in place, financial components and financial benchmarking.”

“Where you want to be” is about the future. “What are your goals and vision for the future?” asked Kirkpatrick. “What are your retirement plans? Retirement is a dirty word with farmers but must be discussed. How are you going to transfer management in a way that helps the next generation gain the best footing to start making farm decisions?”

“How do you get there” includes ways to use information about where you want to be and the steps of how to achieve those goals. This is when professionals such as an attorney are introduced in the process.

Kirkpatrick said to begin the conversation, but not during a family holiday gathering. “Be careful asking what people want,” she said. “Focus more on the goals for the farm business. Successors should have the skills and ability to continue as the family desires.”

by Sally Colby