Farm estate and succession planning – going backwards?

Recently I traveled to Decorah, Iowa, to partake in three days of farm succession plan training through the International Farm Transition Network (IFTN). The IFTN is professionals who focus on the area of farm succession planning and implementation.

I’m told that I am the only attorney licensed in Indiana and/or Michigan who has completed this training. This means I’m either cutting-edge, or so far out in left field there is no hope for me. I hope it is the former and not the latter.

I came away from the training with some real head-scratching statistics from a recent survey of farmers. Some of the more interesting were as follows:

•Identification of successor: 73 percent of farms that were surveyed have not identified a successor. Yes, that means three-quarters of farmers have no idea who is taking over the farm. If this does not frighten those of us involved in agriculture, I’m not sure what will.

•Anticipated retirement age: In 2000, 28 percent of the respondents said they would “never retire”. That number has now increased to 31 percent. In, 2000, 35 percent said they “will retire.” Now that number has plummeted to 22 percent. The only area of improvement was that “semi-retire” went from 38 to 46 percent.

The takeaway from this is that more farmers not retiring is likely due to not having a succession plan. Let’s face it: If you want your farm to continue, but do not have a successor, you likely keep farming until you no longer can.

•Retirement age: Ninety percent of all farmers surveyed stated they foresee retiring after 60 years of age. Thirty-three percent of farmers now say they see retirement coming between the ages of 70-79.

The fact that one-third of the farmers surveyed don’t plan on retiring until they are in their seventies may likely cause the lack of a succession plan. I mean, why do today what you can do a decade or so down the road?

•Source of retirement information: I was totally blown away by the following statistics: In 2000, 45 percent of farmers obtained retirement information from their family. That number now has risen to 54 percent. So, let me get this straight: questions such as income planning, Medicaid/Medicare, long term health care and other important aspects of retirement are now being obtained from family?

Hey, if you have a lawyer, accountant, banker or consultant in the family, then seeking information from family makes sense. Speaking of lawyer, accountant, banker and consultant – except for accountants, from 2000 until now farmers used all these professionals less for retirement advice.

Most frightening, farmers seeking information from “no one” rose from 35 to 48 percent. That means half of the farmers surveyed are not talking to anyone about information pertaining to retirement.

So, sifting through all the above, it appears that farmers are now older, have no successor, plan on not retiring – or, if they do, plan on retiring somewhere in their seventies – and are increasingly not relying on anyone to obtain information about retirement. One would think that with the drumbeat of estate and succession planning we’ve heard more and more over the years, the outcome would be different.

Be that as it may, if we are going to continue family or generational farms in this country, something has to change. But how do we get farmers to change? Well, people like me writing these columns are one. Groups like the IFTN are another.

It’s going to take a collective and collaborative effort of farming professionals working together. As for the current time, here are some thoughts for farmers in grabbing the bull by the horns and getting a plan in place:

•Accept death: Let’s face it, we are all going to die. You may not like it or look forward to it, but get real and accept it. Knowing that it comes for us all, do what you can to identify and cultivate the successor for your farm before death comes. Work to at least have a minimal succession plan in place. Remember: Some succession planning beats no succession planning.

•Build a team of trusted professionals: You don’t operate on yourself or work on your own teeth, so leave the other professional tasks to the professionals. Seek out a lawyer, accountant, financial advisor and other consultants whom you can trust. Build relationships with them. Yes, professionals come with a cost, but so does operating on yourself or pulling your own teeth.

•Retirement age and succession plan: Most farmers, as identified in the survey discussed above, either say they are not going to retire or plan on retiring in their seventies. That’s all fine and good, but remember – the average male life expectancy in the United States is about 76 years old. So, you have a 50 percent chance of not making it through your seventies, meaning that you may not be around as long as you anticipate, let alone continuing to farm.

Instead of putting off generating a retirement plan, make a promise to yourself that at age 62 – which is the first year a person can draw Social Security – that you will pretend you are retiring and drawing Social Security, and will thus need a retirement and succession plan.

If we could somehow get farmers to generate a retirement and succession plan at age 62, it is almost assured that the survey results mentioned in this article would drastically improve. Better yet, how many farms would be saved? How many young farmers could take over farming operations?

How do we persuade farmers to engage in the “rule of 62?” (Yes, I recently made this phrase up as an alteration of the famous “rule of 72.”) Maybe we offer tax credits. Maybe we offer free hats. I don’t have an answer to this.

But, getting farmers to look at 62 as the year where they at least create a worst-case scenario retirement or succession plan would go a long way toward alleviating the problems we are seeing.

These articles are for general informational purposes only and do not constitute an attorney-client relationship. John J. Schwarz, II, is a lifelong farmer in Northeast Indiana and has been an agricultural law attorney for 12 years. He can be reached at 260-351-4440, john@schwarzlawoffice.com, or visit him at www.farmlegacy.com