Is Your Farm Ready to Transition to the Next Generation?
A common misconception about transition planning for a family farm is that having an estate plan is enough to ensure a smooth transfer of assets and responsibilities to the next generation. But an estate plan is only part of a successful transition plan, said Lisa Quist, regional vice president for the Land as Your Legacy program at Nationwide.
Understanding the need for proactive communication within a family regarding farm transition planning, Compeer partnered with Quist and Nationwide for a two-part virtual webinar focused on farm transition planning. During her presentation, Quist noted that an estate plan addresses the distribution of assets after death, but a transition plan includes a comprehensive strategy to prepare the farm for future success while the current generation is still involved.
Quist said this is more important than ever because, during the next 20 years, an estimated 70% of farmland will transfer ownership, with only 30% of that land estimated to remain as land for family farm operations.
“A successful transition plan requires thoughtful consideration of the hopes, dreams and goals of both the current and future generations,” pointed out Quist.
Often, an equal division of assets among the next generation can lead to disagreements and financial difficulties, especially when only one family member of that generation is involved in the family farm operation. Quist highlighted the importance of addressing family dynamics and communication during the entire transition planning process.
“Without clear communication and alignment of expectations among family members, the transition can lead to disputes and misunderstandings, potentially jeopardizing the farm’s future,” she said.
In addition, assembling the right team of professionals, including an attorney, accountant, loan officer, risk manager and financial adviser early in the process is crucial. Compeer Financial has tools and resources available to help start the conversation.
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Quist explained that an effective transition plan requires assessing whether the current business structure is still appropriate and then making the necessary adjustments to align with the farm’s evolving needs and goals. For instance, a business entity set up decades ago may no longer be optimal due to changes in the farm’s operations or external regulations. Regularly reviewing and updating the business plan ensures the farm remains resilient and adaptable.
“The goal is to transform knowledge into action, moving from understanding the importance of transition planning to actively implement strategies that secure the farm’s future,” noted Quist.
Watch the webinar for more insights.
This article was taken from the 2024 fall edition of Cultivate. Read more from this issue here.
Transition Planning
Estate planning is vital to keeping your family farm. Compeer Financial provides resources to help you through succession planning.