Think about the last farmer you interacted with – chances are, you were the younger person involved in that conversation. According to the Bureau of Labor Statistics and the United States Department of Agriculture, the average American farmer is 57 years old. In fact, over 60 percent of farmers in our country are 55 years old or older. Since more than 87 percent of farms are family owned, farm transition planning is becoming an important topic.
Growing up on a beef cattle farm in North Carolina, farming has always been an integral part of my life. Farm transition is a topic that agriculture families across the United States are facing as current farmers age and the younger generation prepares to take over. During my time at North Carolina State University, Dr.Arnold Oltmans, Associate Professor for Agriculture and Resource Economics,provided expert insight.
Dr.Oltmans explained that the hardest thing about farm transitions is getting started. “Everyone recognizes the need for legacy planning, but sitting downwith those involved can be tough,” he said. “The older generation doesn’t care for the topic because it brings up retirement and even death; two very unpleasant conversations for this older American farmer.” Dr. Oltmans went on to describe two ways to talk about this shift in power.
Describe the Assets
The first step is to describe all assets involved and the appropriate way to move those assets. This tends to be a much easier conversation because the transfer of who owns what is fairly simple. A more difficult discussion will be how the inheritance tax will impact this movement of assets. The inheritance tax, or estate tax, can take upwards of 40 percent of the asset. Land-grant universities all over the country hold seminars throughout the year to help families understand the implications such taxes could have on the family farm.
This is where things can get tense. The management transition affects not only the successor and retiree, but also key employees and family members adjusting to new management. Employees need time to feel comfortable with a new leader and the successor needs time to cultivate existing relationships while building new connections. Current leaders can supervise the successor’s development by gradually increasing responsibilities. This is also a good time for current leaders to complete a will or develop a trust.
Some young farmers are doing a great job of starting farm transitioning plans early.For example, Chris Westmoreland, a soon to be college graduate, plans to return to his family farm and one day take over the business from his father. “I’m really looking forward to bringing back some new methods and techniques I’ve learned while in college,” he said. “It’s something our farm needs to continue to grow to support an additional salary.” Chris described how the inheritance tax will impact the lump sum of assets that will be transferred into his name.“I’m glad to start the process now, because it’s going to be a while before the farm is completely mine.”
Continuing the Legacy
Transition planning allows families to assess their current situation, develop future goals and prepare an action plan for success. Family dynamics, managerial styles and physical resources can all play a role in each family’s planning process.
The most important thing to remember is this planning can never be started too early. Transitioning the farm takes time and lots of patience. It gives families the opportunity to uncover complications with enough time to solve them. Patrick Swayze said it best with the statement, “My work is my legacy.”Farming is a legacy we need to pass on to the next generation.
Thanks for taking the time to read my blog. Now that farm transition planning is top of mind, a good first step for current leaders and successors might be to schedule an appointment with their local Cat dealer. When it comes to equipment, the transition can be a smooth one with consistent service, support and product knowledge.