DES MOINES — “If you have no plan, no will, that’s an issue,” Jim Harvey, of Heartland Financial Resource Group in West Des Moines, told a group of farmers on the sidelines of the Iowa Power Farming Show here Jan. 31.
The presentation seemed particularly relevant in an era when half of all active farmers are over age 55. Families and individuals filled the meeting room in hopes of learning more about farm transition planning.
“Making a decision to start can be the most important step,” Harvey said.
The nature of family farms can complicate the process, said John Baker, an attorney and administrator at Iowa State University’s Beginning Farmer Center.
“We have to look at [farm transitions] from a business point of view, not a family point of view,” he said.
Baker said in cases where the farm or farming duties are being passed to a family member, the farmer transitioning out of control may be reluctant to approach the move from a legal angle, avoiding contracts in favor of a verbal agreement and handshake instead. But, Baker warns, this approach can lead to problems down the road.
“Family trees never change, but if we had a business together, at some point the roles change,” Baker said. “That’s what we’re talking about, a planned change of the organization charts. Other businesses use these techniques and are successful at it.
“This is not rocket science. There’s no magic way of doing things. Every family is different. … A lot of family choices are emotional, but when I’m thinking about investments, that’s a rational decision.”
Harvey uses the following process for helping families plan:
- Specific goal setting — Establish what the older farmer wishes for his or her operation and set a desired timeline for transition.
- Data collection — Collect relevant documents, create an assets and liabilities list and review all operational agreements already in existence.
- Plan design — Involve legal and tax advisors in the process, confirm goals, complete a current estate tax analysis and review all documents.
- Plan implementation — Draft transition documents and plan ahead for future funding needs (what your income in retirement will be, for example). Involve all necessary advisors, family members and farm employees in this stage.
- Ongoing monitoring — Once the plan is in place, monitor its success over time. Verify goals and objectives are met and that it continues to fulfill the needs of those involved.
“Most of the time we know how to get into business, but we may not know how to get out,” Harvey said.
Teresa Opheim, formerly with Practical Farmers of Iowa, offered her thoughts on farm transitions in a recent column in Lee Agri-Media’s Agri-View publication.
“Farm transfer is tricky. Often it’s better to have an independent facilitator for family meetings or discussions, to help work through farm transfer,” she said. “Start by listening — fully listening — without thinking about what to say next.”
After all the talk of planning and tough decision making, Baker pointed out a final truth about families.
“Whether or not the business continues, it’s equally important the family can sit down at Thanksgiving together and celebrate,” he said. “When we talk about the value of the asset, we can measure in dollars and cents, but there’s also a lot of things that we can’t put a value on.”