Accountant Mike Peachey has sat at many settlements over the years, but one settlement 25 years ago has always stood out to him.

That day, he was with a family that was selling the farm. It wasn’t a pleasant experience. The family had to be separated and sat at two separate tables. At one table was his client, and at the other table was his client’s mother and brother.

Peachey says he was brought in to deal with the tax consequences of selling the farm, but long-lasting damage was already done. “The farm was sold from under my client by his mother and brother,” he says. “He sat at that table and wept because of the difficulty … his dream was gone."

He often talks about this settlement, he says, because it’s a clear example of what can go wrong when miscommunication and lack of succession planning can split families apart.

A recent half-day meeting put together by the Professional Dairy Managers of Pennsylvania delved into the difficult topic of farm succession and how farm owners can prevent future problems by communicating and planning today.

Jennifer Voss, a business and family management consultant with The Voss Group in Williamsville, N.Y., said the biggest beneficiary of improper estate and farm succession planning is the government because not mitigating potential tax effects of passing on the farm will hurt others down the road.

She highlighted the federal estate tax exemption, which stands at $12.92 million but will go down to $6.4 million in 2026, as an example of the need to plan.

"Now is the time if you haven't started planning and you have a farm that's got a lot of land, because we know land values are going up,” Voss said. “Start thinking about how we're going to deal with this changing landscape. I don't think anybody thinks something is going to miraculously occur that's going to keep this where it is now. We fully expect that [decrease] to happen.”

Mike Hosterman, ag business consultant with Horizon Farm Credit, said constant communication between family members is key to developing a farm succession plan. It’s something he has become passionate about because of his family’s experience. A dispute between he and the other family members on the dairy farm’s succession plan drove everyone apart, and he ended up leaving the farm.

"We could not agree on how the family could operate or transition,” he said. “To be honest, it came down to a question of what was fair versus what was equal. But because of that background and experience, I want to help other farmers to not go through the same thing. After 18 years as a loan officer, the one thing I tried to do was to help families develop the plan.”

"And it is really communication, about how we talk to each other, how we treat each other,” he added. “And I'm a believer in thinking that maybe our transition plan's done … it's always ongoing. Even once your plan's done, we need to be thinking about it.”

Future vision

Voss said the most important part of farm succession planning is thinking about what the farm will look like in the long term.

“Where’s the end game? What's the future look like? What's important to you? What are your goals? Because all planning starts with goals," she said.

A will and estate plan are two different things. In fact, Voss said the will should be the last thing included in the overall estate plan after the succession plan, gifts, life insurance beneficiaries and other things have been hammered out.

Succession planning is a two-way street. Voss said farmers who want to be the next-generation owners should be open about what they want and what their future goals are to see if they align with the current farm owner’s goals.

Even if you don’t have a son or daughter who wants to take over some day, Peachey said it’s still important to have a plan in place.

“Work can be done to prepare the business to sell if that is going to happen,” he said. “So, develop a good team, because any buyer who sees a good team in place will pay more for the business. Having good financials and herd records, just being organized and showing cash flow, and improving this to demonstrate that you have a good, strong viable business model. It's really about telling your story to make your operation that much more attractive to someone wanting to buy it.”

Fresh eyes

Having an outside facilitator lead the discussion can be a good way to get fresh eyes on the situation and to provide some outside feedback, Voss said.

Tony Brubaker — who is in partnership with his brother, Mike, and nephew Josh on their Mount Joy, Pa., Brubaker Farms — said having a facilitator helped the family form a finalized, concrete farm succession plan.

The partnership with his brother has been in place since 1994, when the brothers partnered with their father, Luke, but Tony described it as a haphazard agreement with not a lot of structure.

In 2013, the three partners decided to make a more formalized plan and brought in some outside advisers.

“We were working on the plan for several years and found out what everybody’s goals were individually. Communication was there, so the goals matched,” Brubaker said.

One of his goals was for the farm to continue as a business, and part of that was putting in discounts for family members who wanted to buy in. In 2020, his nephew Josh bought a 20% share in the business at a discounted rate.

Brubaker said he and his brother have even started thinking about their own retirement and currently pay their parents’ retirement income. He said they have brought in financial advisers to guide them through that discussion, and planning on how the farm will look like in the future to an operating business and possibly multiple retired family members.

Living document

Lucas Waybright, whose family runs Mason-Dixon Farms just south of Gettysburg, Pa., left the family business about a year ago, as he didn’t feel the farm’s transition aligned with his goals. He now works for Pasa Sustainable Agriculture, leading a pasture-based dairying project.

Still, he was involved in the development of the farm’s transition plan from his father’s generation to his; a complicated process that included 12 owners and lots of assets.

He said farmers should think about their estate or transition plan as a living document, one that can change for many reasons — death, injury and other interests among them.

“I kind of look at that as similar to a farmer who would have a crop plan,” Waybright said. “It might be February, and you might be sitting around a table and saying, alright, this is what we’re going to do. We’re going to harvest barley, and we’re going to plant corn, and then guess what, May comes, it rains all month, and then you have to adjust that plan.

“It’s about making adjustments on the fly, but you have to have that backup set up well in advance, ready to move at a moment’s notice. And it’s important to communicate to heirs that things can change. It’s a living document.”