(Note: this article is a continuation of a several part series)
Perhaps the biggest obstacle for farmers in establishing a succession plan is a fear of where to start. I think most farmers would start the process if they realized how easy it was. To begin, a person should ask themselves what they want to do with their farming operation when they can no longer operate it. Perhaps they want to pass it on to the next generation. Maybe they view the farming operation as their 401(k) and they plan on cashing out and moving someplace warm. Maybe they don’t have heirs, but would like to do a gradual sale to a young farmer eager to break into farming.

Once you have your goal in place, the rest is easy. All you have to do is put a plan together that will obtain your goal. Without a goal, you can’t put an adequate succession plan together. I can’t tell you how many times I have met with clients who want to establish a succession plan, but don’t know what their long-term goals are.

Often times, families are afraid of setting a goal out of fear of causing family strife. Parents may feel their goals will not be received well by their children. For example, let’s say a husband and wife has four children, only one of whom wants to continue the farming operation. The husband and wife know that in order for the one child to continue the farming operation, more than likely that child needs to receive a larger share of the estate. However, the husband and wife know the other children will react negatively. So, the husband and wife put off doing any succession planning out of fear of causing family strife. I’ve seen this over and over, and I can never understand why the family didn’t just sit down, communicate the parents’ goal, and work on a plan to meet the goal.

Sadly, there are so many tools in the “estate planning toolbox” that can be used so as to treat all heirs as equally as possible, but still give the farming heir a fighting chance at continuing the farming operation.

The point I’m getting at is this: almost all goals will have pros and cons, but proper planning ahead of time can reduce the cons greatly.

Some things to consider when establishing a goal for the transition of your farming operation:

You won’t live forever, and there will surely come a day when you will physically be unable to operate your farm. You must have a retirement/succession that meets your needs in your elder years.
Don’t employ the “I’ll be dead and gone and won’t care” attitude. I’ve always thought such to be a cover up for being lazy or afraid. If a person cares about their spouse, children, or whoever else inherits, they will recognize the need for a plan that ensures a smooth transition.

Make sure the entire family is aware of the goal. If the parents are desirous of one child continuing on the farming operation, then the entire family should be made aware. Nothing is worse than when children are kept in the dark as to the distribution of assets until after the death of the parents. You’ll either set your estate up for a will contest, have your children hate each other, or both.

Remember, fair does not always mean equal. If some children have worked the farm, and others have not, then it may be entirely fair to leave assets in unequal shares. There is no law dictating that you have to leave equal assets, or any assets for that matter.

Recognize that goals change over time. The goals you have today may change at some point in the future. However, most succession plans can be fluid enough so as to adapt to meet changing goals. Thus, a succession plan should not be put off just because there may be doubt as to the longevity of the current goals.

In the end, setting your long-term goals is the starting place to creating a succession plan. After that, it merely takes matching a succession plan that will meet your goals. We’ll talk more on that next month.

John J. Schwarz, II, is a farmer and attorney in Steuben County, Ind. He focuses his practice on agricultural law and legal issues important to farming communities. He can be reached at 260-665-9779 or jschwarz@cresslaw.com

These articles are for general informational purposes only. If you have a specific legal question, you should consult an attorney. The views and opinions expressed in this column are those of the author and not necessarily those of Farm World.