Debt and Interest Rates

The Unspoken Truth About Farm Succession Planning

Farm succession plans fail less often for lack of paperwork than for lack of conversation. Families can farm side by side for decades and never say aloud who gets what, who runs it and when anyone steps back.

Why do families avoid the conversation?

The topic touches money, fairness, age and death, which are the four subjects families like least. A parent may fear looking like they are pushing a child out. A child may fear looking greedy. Siblings off the farm may feel left out. So everyone waits, and waiting is itself a plan, just not a good one.

Many farmers also see the farm as their identity, and handing it over feels like stepping off a cliff. That is not irrational. It means the plan has to address feelings as well as figures. A parent may need a role, a title or a place at the table after the transfer, and a plan that ignores that tends to stall.

What does succession actually involve?

There are two parts, and they are not the same. Management succession is about who makes decisions and when. Ownership succession is about who owns land, equipment, livestock and the business. A family can transfer one without the other, and sorting out which comes first is a major part of planning.

Plans usually involve a lawyer, a tax professional and a lender, and they differ across entities and states. This is general education, not legal or tax advice. See federal tax guidance from the IRS and talk to a licensed attorney in Oklahoma for legal questions.

• Who will manage, and when does that start?
• Who will own land, equipment and livestock?
• How will off-farm heirs be treated fairly?
• What happens if someone dies or becomes disabled?
• How will debts and leases carry forward?

What is the fairness problem?

Fair does not always mean equal. A child who works on the farm for decades may expect more than a sibling who left. The sibling may expect equal shares of land that now carries most of the family wealth. Valuing the farm, deciding on payments or leases and weighing contributions are the hard parts.

Some families use a mediator or an advisor trained in family business to keep the conversation productive. It helps to write down what each person wants before the meeting. Disagreements are normal, and surprises at a funeral are worse. A farm near Enid that has been in the family for three generations carries a lot of history, and each person in the room remembers that history a little differently, so give everyone time to speak before anyone proposes a number.

What do the numbers look like?

Land values, estate rules, tax treatment and loan terms all affect succession. Rules change, so confirm current details with a tax professional and the official federal tax pages rather than relying on rules of thumb. The Census of Agriculture reports the ages of farm operators, which is one reason this topic keeps coming up. Check the current census figures yourself rather than trusting a number you heard at a meeting.

Lenders also need to know the plan. Programs from FSA and Farm Credit associations may include help for beginning farmers or transfers, and terms change, so ask directly.

What can you do near Enid or anywhere else?

Start small. Set a date for a family meeting, bring coffee and agree to talk about what each person wants, not to make decisions. Then see an attorney and tax professional with those notes. The OSU Extension often offers programs on farm transition, and the Oklahoma Farm Bureau may help connect you to resources.

Basic planning tools are at this farm money guide and the small operation view is at a small farm guide.

What is the cost of waiting?

Waiting can mean a rushed sale, an unplanned tax bill, family conflict or an heir who walks away because no one told them their role. It can also mean a farm that closes because a good successor never got the keys, which is a loss for the whole community.

Over at farm.FM the farming section and the ranching section carry stories of families who went through it, and a farm.FM story on farm succession is a good place to start. Start the conversation this month, even if it only lasts twenty minutes. A rough plan that exists is better than a perfect plan that never begins, and every family that has done this will tell you the first talk was the hardest.

Sources and further reading

• IRS: federal tax guidance
• Census of Agriculture: USDA census of farms
• FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
• Farm Credit: cooperative agricultural lending network
• OSU Extension: Oklahoma State extension
• Oklahoma Farm Bureau: state farm organization

Ask locally: Ask an Oklahoma attorney, a tax professional and your county extension office about farm transition planning.