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