How the History of Your Farm Reveals Succession Planning Lessons

Farm succession planning is not just a consideration for the next generation. Often the current farming generation is also a success story of succession planning for generations past. Farms tell the stories of hard work, perseverance, and sacrifice that stretch across generations. Farm succession planning never stops.

One of the interesting aspects of our farm succession planning and real estate practice is that it is part of our job to review the history of the farm property. For an active farm that has been in the family name for well over 100 years, we can learn some important lessons. As an example, a recent review of a client’s farm showed the fourth generation farmer had been the recipient of his ancestors clearly placing a priority on the continuation of the farm over extracting value or treating other children equally. This was done through lifetime gift transfers or outright distributions at death solely to the farming heir. The very history of the property, as evidenced by the property records, reveals how prior generations approached farm succession planning.

Yet, when it comes to succession planning today, many families face tough questions: How do we honor the sacrifices of those who came before us? How do we ensure the farm continues for the next generation? And how do we navigate fairness within the family? How much weight should we give to the value of the farm in what a farming heir will receive versus non-farm assets and what non-farming heirs will receive?

These questions hit on what we need to consider in farm succession planning and the responsibility farm operators bear in caring for the generations ahead. The current landowners are stewards of an incredible legacy. While they have undoubtedly worked hard to grow and expand the operation, they’ve also benefited from the sacrifices of prior generations who often gifted, bequeathed, or sold farmland at a discount to keep the operation intact. If prior generations placed greater emphasis on creating equality in succession planning, it is very likely the farm would not have made it to the current generation – especially when you consider that prior generations often had large families (imagine dividing a farm in 10 shares and telling the farming heir to buyout 9 shares if they wanted to keep it together).

We think our ancestors knew what they were doing when they prioritized the continuation of the farm, and we should keep this mindset at the forefront in developing a plan for descendants.

A Legacy of Sacrifice

Prior generations understood the importance of prioritizing the farm’s survival over treating everyone equally or giving too much consideration to financial gain. These generations lived through the Great Depression, the boom years, oil embargos, high inflation, the farm crisis of the 1980s, and every market in between. And all through it, for some families, the farm continued. That took incredible sacrifice and tough decisions. So often, we hear clients say, “We thought we were going to end up broke and lose the farm” when discussing some of the challenges. One client in particular reflected with some amusement and exclaimed, “We worked our asses off to keep this together!” Let’s not forget those sacrifices when it comes to farm succession planning.

Though, today, we do see a shift in personal values as well as farm values. High land values and societal expectations around fairness have brought new challenges to succession planning. In some cases, families are tempted to treat the farm as a financial asset to be divided equally among heirs. They want to treat everyone equally or close to equally. To which we ask, equal according to what? Equal in asset values? Based on when – the day you happen to die no matter what land values happen to be doing at that time? Equal in the amount of income those assets generate? Equal according to the amount each child contributed to building those assets? Here is the reality – in farming, fair is NEVER equal!

See our post, Are Non-Farming Heirs Entitled to a Farm Inheritance?

While “equal” might feel fair on the surface, it can undermine the very foundation that previous generations worked so hard to preserve.

Fair vs. Equal: Ensuring Continuity

At Wagner Oehler, Ltd., we guide families through the complex balance of fairness and practicality every day. Here’s what we’ve found:

  • Fair isn’t always equal: Farming heirs who have dedicated their lives to the farm contribute significantly to its success. We regularly hear clients tell us that they would have had to retire from farming much earlier (which would have diminished any non-farm savings) or that the farm would not have grown to where it is today without their farming heir (yet it is typically the older generation who have benefited on the balance sheet from the growth of the farm). These factors and the investment of the farming heir should be reflected in the planning. This is not only fair but essential to the operation’s continuity.
  • Protecting the farm benefits everyone: Maintaining a thriving farm preserves a legacy that benefits all family members, even those who are not directly involved in its operation. Those non-farming heirs who bemoan not receiving a piece of the “family farm” often do not actually hold and use it as a family farm. Instead, the property is sold, and it becomes somebody else’s family farm – forever breaking the chain of passing the farm to the next generation.
  • Traditional wisdom still applies: Previous generations’ decisions to prioritize continuing the family ownership of the farm through a farming heir have proven effective in preserving farms through economic and generational challenges. These practices are worth carrying forward.

Planning for the Future

Succession planning isn’t just about adding up and dividing assets; it’s about ensuring the farm’s legacy. Here are some steps to consider:

  1. Start the conversation early: Open and honest discussions with family members can uncover shared goals and concerns. If you have a potential farming heir, try to gauge their long-term interest. Do they even know what you are thinking? Have you said that there is a place for them on the farm if they are dedicated to this life?
  2. Work with professionals: An experienced farm estate planning attorney can help you navigate tax laws, create fair arrangements, and structure your plan to ensure the farm’s continuity. In this step, it is critical you surround yourself with professionals who work with family farms every day. Estate planning attorneys without experience working with farmers may assume everything should be equal – an assumption that so often leads to a failed farm estate plan.
  3. Think long-term: Consider the sacrifices of prior generations. Look back at your own family history. Pull out and read your Abstract of Title. How did the farm get to where it is today? What had to happen for it to be in your hands? How can you protect the farm’s future by learning the lessons of your farm’s past? See our post: The Time to Start Thinking About Farm Succession Planning is Now.

Next Steps

As stewards of your family’s legacy, your decisions today will echo for generations. At Wagner Oehler, Ltd., we’re here to guide you through life’s most crucial legal decisions, including farm succession planning (check out our video on Farm Succession Planning and subscribe for more content). Together, we can create a plan that honors the sacrifices of the past and secures the future of your farm.

Contact us today to schedule a consultation. Keep an eye on our Events page located at: https://www.wagnerlegalmn.com/events/ for farm succession planning events.

The farm is your legacy. Protect it with a plan that works as hard as you do. Farming matters.

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Categories: Estate Planning, Farm