4 Succession Planning Tips: How to Transition the Family Farm or Ranch to the Next Generation

BY: BRUCE CARSON
Vice President, Relationship Manager
(405) 608-8662

It is a life-changing experience when children receive a family farm or ranch from their parents. For many families, their farm or ranch is not only their largest financial asset, it represents the collective blood, sweat and tears of generations of family members.

For the children, the transition adds an extra level of importance – and due diligence – because they want to make sure Mom and Dad are well-positioned financially and that each sibling is treated equitably. There’s no cookie-cutter solution to transferring a farm or ranch to the next generation, but here are four tips that can help the process go smoothly:

1. Get the entire family involved in the succession plan Transitioning a family farm or ranch should be a family decision. Chances are that not all siblings will want to follow in their parents’ footsteps, so it’s important to get everyone involved – and together at the same time – at each step of the process. When discussing the transition, be sure family members share their goals and vision for the family farm/ranch.

2. Create an itemized list of assets, liabilities and related documents A key step in building a transition plan is to conduct an inventory of assets and liabilities. The inventory should include assets such as farm/ranching equipment, livestock/harvested crops, real estate and retirement savings. Liabilities should include mortgages, personal loans and other debts. Also, collect financial statements, tax returns, deeds to real estate, mineral/timber rights agreements, lease agreements and wills and related estate planning documents. You need to know what you own, what you owe and how much income is being generated so you have an accurate picture of the financial health of your family farm/ranch. Remember, succession is not an event; it’s a process that often takes several years to complete, so the better prepared you are, the smoother it will go.

3. Bring in experts to help you along the way Transitioning a family farm/ranch is not a do-it-yourself project. There are complex tax, accounting and legal issues at the local, state and federal levels that need to be sorted out so your succession plan achieves the desired results. Attorneys, accountants, insurance agents and wealth management experts can bring the expertise needed to navigate challenges along the way. While this may seem obvious, it’s important to only choose advisors who are experienced in agriculture and succession planning. This isn’t the type of project where you bring in a friend-of-a-friend who can do the work for less than what a veteran ag expert would charge. Also, make sure family members agree on your advisor team selections.

4. Create and implement the plan Only around 30 percent of family-owned businesses make the transition into the second generation and 12 percent into the third generation. A sound business plan – agreed to by your family and team of advisors – will help overcome obstacles along the way and smooth the transition. The plan should have measurable goals for both the short and long term. It’s also advisable to hold monthly family meetings to review progress and modify the plan if necessary. Succession planning and implementation isn’t easy, but it can certainly be rewarding when the plan is executed correctly. And by following these steps, you’ll successfully transition your business from one generation to the next and preserve your family’s legacy.

About

Argent Financial Group

Celebrating its 30th anniversary in 2020, Argent Financial Group (Argent) is a leading, independent, fiduciary wealth management firm. Responsible for more than $30 billion in client assets, Argent provides individuals, families, businesses and institutions with a broad range of wealth management services, including trust and estate administration, investment management, ESOPs, retirement plan consulting, funeral and cemetery trusts, charitable organization administration, oil and gas (mineral) management and other unique financial services. Headquartered in Ruston, Louisiana, Argent was formed in 1990 and traces its roots back to 1930.

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