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3 tips to make farm transitions successful

Young farmers working toward transition into the farming operation need to understand a few basic steps.

June 20, 2023

5 Min Read
three generations of farmers in field
TIPS TO TRANSITION: Having those tough transition conversations early on, understanding sweat equity and respecting the sacrifices made by previous generations in building the legacy of a family farm are among the steps needed during the transition process. Peter Garrard Beck/Getty

by Charlotte Brockman

Families are a lot of work, and if you work with your family, you know that it can be challenging. In agriculture, we are not strangers to working with family. However, how enjoyable that is greatly depends on a few important things.

If you're young, ambitious and have hope of returning to the family farm, you may have questions about what your future may hold after you return. Transitioning the farm from one generation to the next can be uncertain, but only if you let it. As a younger generation, there is an opportunity to bring new things to the farm and make the transition less uncertain.

3 priorities for coming back

Wesley Tucker, University of Missouri Extension field specialist in business and family farm succession planning expert, has assisted in many family negotiations. Speaking at the Nebraska Farm Bureau Young Farmers and Ranchers Conference last winter, he offered advice to those coming back to join a family farm operation.

He gives these three tips for having a successful transition when going back to the farm:

1. Have difficult conversations upfront. Making sure your expectations are known early will prevent a lot of heartbreak down the road. If you want to run the farm before the death of your parent or grandparent, make that known. However, don’t forget that they are family. This conversation is likely to go much better if you show interest in the past and the legacy your predecessor has built.

2. Expect to buy into the operation and earn your share. The previous generation has worked hard to build the operation and may be concerned with protecting their legacy. As the younger generation, you should work to build a plan that secures your future and the previous generation. “Farming is a poor cash earner, and great wealth builder, so get creative with compensation plans for your future,” Tucker says. This might include a plan to acquire land after each year or gain ownership in an LLC if the farm is set up as a legal entity.

3. Know you are investing in your future. The last thing you want to happen is to work your entire life, only to find that the correct planning steps have not been taken, and you are put in a position to lose your livelihood. This is where you ask the question, “Is the farm an inheritance or a business asset?”

After you have had some hard conversations and gotten creative with your compensation plans, it would be wise to form a professional team.

“This should include an estate planning lawyer, tax professional, financial planner and maybe a succession planner if a moderator is needed,” Tucker says. Securing your future should be your No. 1 priority when going back — and having a good team to help you do that is essential to the process.

Building succession

If you know you will be returning to your family's operation and have already had some tough conversations to ensure your future on the farm, there are a few things to consider.

The first is to “send the younger generation away,” Tucker says. The experience you will gain by learning from another producer will help you form a different perspective to help the family business and give you the skills you need to understand what it takes to be an employee.

Once you return to the farm and have had some tough discussions about what the future may look like, the younger generation should start working as an employee. “This is a time to see if we can navigate family and business,” Tucker says.

This first step is critical and allows a period of time to walk away if it doesn’t work. This is also an important time to earn sweat equity. “If your presence is generating more than they are being paid, sweat equity should be acquired,” he says. In the early stages, it is especially important to have a plan to be compensated fairly for your time and efforts.

The next step would be for the younger generation to move into management and make some operation decisions. At this point, you have earned enough equity and begun to invest in the farm for your future, and the legacy of the farm.

After working through operational management, the next step is financial management. “Financial decision-making is often the last thing to be let go of in a family transition,” Tucker notes.

At this point, it is especially important to understand that the older generation is still around and is a part of these decisions as well.

In the last step, the younger generation moves to the majority manager and the older generation takes a step back. This can be the hardest step to take, but it ensures that both the younger generation and the older generation have security moving forward. The older generation can still act as a mentor, while the younger generation will have decision-making power.

Family ties

Working with your family may be one of the most difficult things you do in your farming career. Without a plan, it can destroy families and businesses, leaving all parties hurt. Although, by having difficult conversations, setting clear expectations and planning for the future with a professional team, working with family may get a little easier.

If you would like to know more about family farm succession planning, read the “Five Phases of Management Transition During Family Farm Succession,” or reach out to Tucker at [email protected].

Brockman writes from Lincoln.

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Farm Succession
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