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What to Do With the Family Farm

By Anieta McCracken

What happens to the family farm when it’s time to retire or to pass it on? The answers are as varied as the farmers who’ve made the transition.  Nancy Slye’s creativity and entrepreneurial spirit enabled her to keep her Broadway, Virginia, farm, Tralfamadore Farms, until it passes to her son.

This quiet peaceful scene is a contradiction to turmoil a retiring farmer often feels. Photo by Anieta McCracken

The farm is home to llamas, sheep, goats, peafowl, guinea fowl and goats.  Slye, a fiber artist who spins yarn and weaves wall hangings and other art work, uses peacock feathers, wool and hair from the animals in her artistic creations and for the classes she teaches.

Dale and Debbie Hooker of South Dayton, New York, however, opted not to buy his father’s farming operation.  For now the land is rented out, as no family member has expressed interest in farming the land.

“I still feel I’ve made the right decision for my family,“ Hooker said.  But “you always have that sense of guilt that you couldn’t keep it going. You get attached to the land. You know every wet spot, every puddle. [But] then you look at the dollars and cents.”  He still hopes that “someone down the line will take care of it.”

The scenarios above illustrate some of the decisions farm families are making as farmland prices rise, profits decrease and farm owners reach retirement age.  Making the right decision requires effective, honest communication amongst everyone involved.

Yet communication is the hardest step.  The older generation may have an idea of what they want, but be loath to talk about their own mortality. Or perhaps they are afraid that raising the issues will create family discord.  Sometimes a third party can help. The New York Farm Link offers free help for farmers who need to develop a plan that meets each involved party’s personal goals.

Sometimes the discussion centers on equitable distribution of the farm assets, wills and tax management, said Tom Stanley, the extension agent for farm business management in Augusta County, Virginia.  But the time for discussing these issues is much farther down the communication road, after each person involved has had the chance to clearly outline their goals, values and desires.

Another topic that is too often neglected but needed early in the process is that of power of attorney and advanced medical directives (this may be a living will, health care proxy or health care power of attorney, depending on state law).  Because a farm owner often becomes incapacitated before death, a power of attorney is an absolute necessity if the farm operation is to continue,Stanleysaid.  Each of these documents needs to be placed in a safe place where the appropriate people can find and access them.

Another hurdle to cross is figuring out how to meet the needs of both the retiring farm owner and the heirs’ needs.  A too-common scenario involves a husband and wife who own the farm together.  He passes away first.  Now “you’re left with an elderly widow who will live as long as she can in the home she shared with her husband,”Stanleysaid.  Long-term care and retirement costs may prevent an heir from operating the farm without some form of outside income to cover living expenses.  Options, such as land easements, buying development rights, and insurance plans exist that may make it possible to keep the farm in the family; but the issues need to be addressed long before an owner has critical health concerns.

Involved parties have to be realistic about the task they face.  Balance sheets, cash flow, all farm resources and infrastructure, debt load, etc, all must be considered during the planning process.  Once goals, values and immediate issues are addressed, it’s time to start long term planning, including target dates for each strategic step toward the long term goal.

According to Ny Farmlink Communications Director Ed Staehr, “the New York Farm Link staff will help put together a financial package and wade through the regulations.  We routinely work with over 1,000 families. Ninety percent of the families we work with stay in business.”

Such planning includes how and when management decisions will be transferred to the heir.  If the heir has been operating primarily as a production worker, but has made few management decisions or lacked the knowledge to know how to negotiate a loan, or understand the market and when to sell, the heir will need to incrementally increase decision-making as knowledge and experience are gained.  Here again the New York Farm Link’s expertise may help. The link has social workers with master’s degrees, most of them licensed, to help work through personal issues. Financial consultants with at least a four-year degree and agricultural experience are also able to help.

And “you don’t ever have to leave a message on a machine,” Staehr said. “If the call is serious, the service will call a consultant.”

Questions for Communicating and Goal Setting for Farm Transfer

Adapted from 12 Questions to Answer: www.iplantofarm.com
1. How do I approach my desired successor about transferring the farm?
2. What are my goals for the farm? My heir’s goals?
3. What options exist besides selling off assets or land?
4. Is changing the operation or adding value to existing products an option?
5. What business structure best reflects the business ownership and operation?
6. Am I ready to change my management practices and/or farm ownership?
7. What disruptions can be anticipated during the transition process?
8. Is there a sound, written business plan?
9. Is there enough capital to support the farm during the transition process, to support both heirs and retired/retiring owners?
10. Who should be part of my succession planning team? (Experts say that, at a minimum, there should be an attorney and tax advisor who has specialized in farm transitions. A mediator or pastor may also be desired).

Those outside of New York state can still find help through the National Farm Transition Network.  http://www.farmtransition.org/aboutnetw.html.  The states that are part of the network include:California,Connecticut,Iowa,Maine,Maryland,Massachusetts,Michigan,Minnesota,Montana,Nebraska,New Hampshire,New Jersey,New York,North Carolina,Ohio,Pennsylvania,Rhode Island,Vermont,Virginia,Washington andWisconsin.  A farmer’s state department of agriculture, state or county extension agent, or Farm Bureau may also be of help.  Other resources may be unique for the state in which the farm is located, but available through the Internet by using “farm transition” as a key phrase in your favorite search engine.

But the planning and the research must be started now.  A farmer can’t spend all day planning for production and no time planning how to pass on the family farm.

Anieta McCracken is a retired farmer’s daughter. A freelance author and adjunct paralegal professor, she can be contacted by readers at anieta.mccracken@gmail.com.

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