Understanding Farm Transition Planning
Understanding Farm Transition Planning
You may have heard the term Farm Transition Planning and were wondering what it’s all about. Farm Transition Planning is a hot topic these days, with more and more farm families beginning to learn about what it means to them and their ag operations.
There is often a misconception that farm transition planning simply means how the property will be distributed from one generation to the next. The reality is there is much more to it. A farm transition plan is much more than who gets what, it’s a working plan that encompasses the goals and wishes of the current and future business owners and secures the ongoing success of the agricultural operation.
When looking into developing a farm transition plan, the topic may seem overwhelming resulting in putting it off for another day. Unfortunately, this is a risk that some farms have taken. It has left them wishing they had taken the time to create a transition plan that would have secured a better outcome.
To ensure the success of your operation, the best place to begin is with the understanding of what a good transition plan consists of and what’s involved in the planning process. Begin to learn about who should be involved, about what discussions need to take place, and who can help you. Also, there are multiple resources available to assist you in your planning. Take advantage of what is offered and don’t be afraid to reach out to someone if you have questions. The Farm Credit Knowledge Center, your lending institution and your local county extension office are all available to answer questions and connect you to resources.
If you are in the beginning stages of the farm transition planning process, take time to understand the bigger picture. When you are ready, reach out and gather your planning resources.
Here is a general overview.
- 78% intend to pass their business on to children, only 34% create a succession plan.
- 1% of businesses survive to the fourth generation.
What is a Farm Transition Plan?
A farm transition plan is the “roadmap” of the agricultural operation if for some chance the managers or operators were to suddenly become temporarily or permanently unavailable. It contains information about all aspects of the business to include family and farm goals, legal and business information.
Importance of a Farm Transition Plan
There are multiple reasons a transition plan should be put in place. Some top reasons are:
- Assures the next generation is prepared and capable of managing the business.
- Ensures success of the agricultural operation when transferred from one generation to the next.
- Places the businesses operation plan on paper.
- May possibly prevent family turmoil because family members were involved in the planning process.
What’s in a good plan?
- A good transition plan involves transferring onto the next generation the necessary skills and knowledge to run the business.
- Information and records to include location of documents, account and policy numbers, passwords, etc.
- A complete list of the main suppliers for the operation.
- Documentation of the legal structure of the business
Who should be involved?
Transition planning involves multiple people covering many topics. Consider forming an advisory team. The team can consist of an attorney, accountant, lender, consultants and family members. An advisory team that meets on a regular basis can be a huge help with getting your affairs in order and for keeping your plan up to date and current. An effective advisory team is one that meets regularly, takes good notes, and helps to guide decision making in line with family wishes and goals.
How long will it take?
Every farm transition plan will be unique and there is no set time for how long it takes to complete. The best way to approach the process is to understand what needs to be completed, to prioritize tasks and to set completion goals.
A thorough and well-thought-out farm transition plan is a must-have for any agricultural operation, no matter the size or industry. Don’t let yourself become overwhelmed. There are multiple operations that have sought assistance and have successfully completed plans. You can too! There are people ready to assist you and answer your questions. Farm transition resources are available to help you understand the process and some even have worksheets to help you plan.
If you are not sure where to start, please feel free to contact the Farm Credit Knowledge Center. We can point you in the right direction and refer you to people and resources to help you!
What is Farm Transition and Succession Planning? Recorded webinar. Dr. Alex White, Virginia Tech. https://www.farmcreditofvirginias.com/knowledge-center/resources/educational-videos
Virginia Cooperative Extension Farm Transition Planning Resource List- https://www.pubs.ext.vt.edu/tags.resource.html/pubs_ext_vt_edu:farm-transition-planning
Planning the Future of Your Farm: A Workbook Supporting Farm Transfer Decisions, Virginia Edition-https://www.pubs.ext.vt.edu/446/446-610/446-610.html
Farm Business Transition Planning Workbook-Farm Credit University and Dr. Alex White, Virginia Tech-Contact your local Farm Credit of the Virginias branch office or the Knowledge Center at firstname.lastname@example.org
- Getting Your Farm and Family Affairs in Order Planning Document
- Planning for the Successful Transition of Your Agricultural Business Fact Sheet
- Whole Farm Planning Model
Sources: www.canr.msu.edu, Ohio state University Extension
For a PDF version of the Resource Guide, click here.