While farm and ranch transfer planning has always been an important part of planning for an agricultural business, the need for effective farm/ranch transfer planning is greater than ever with the average age of farmers and ranchers increasing worldwide resulting in many more acres/hectares of farm and ranch land changing ownership in the coming years. With so much land in transition and the additional threat of development, the pressure on families to sell to the highest bidder is great. The potential loss of agricultural land to development or corporate interests means that there is an even greater need to support agricultural families in thoughtful transfer planning to keep these working lands in production by local owner-operators and to keep these rural communities strong and productive.
It was with these challenges in mind that HMI took on the task of creating a Farm/Ranch Transfer Planning learning module and manual with the help of the Thornburg Foundation and a team of Certified Educators who had experience using the Holistic Management® Framework as a tool to help step people through the various components of a Farm/Ranch Transfer. We also collected stories from our network of how they had used Holistic Management to help them through the process.
The result is Leaving a Lasting Legacy: A Holistic Approach to Farm/Ranch Transfer Planning which is available on HMI’s store.
As we reviewed the various transfer planning processes and tools, we noted that the key components for a successful and sustainable farm/ranch transfer all started with discussing in general terms the importance of goalsetting and gaining clarity about individual and business vision. Obviously, the holistic goalsetting was a helpful process for naming those values and creating common ground and vision which helped these business owners then with their planning for the other key components that make up a transfer plan:
- Business Plan
- Land Plan
- Estate Plan
- Retirement Plan
- Management Transfer Plan
- Asset Transfer Plan
Articulated within each of these plans, which had been given context by the family’s holistic goal, were the answers to key questions that I believe each member of a family involved in management and asset transfers should consider:
- What are your values? Using the family’s holistic goal can help identify common ground for multiple generations.
- What is your legacy you want to leave? Using the vision statement in the family’s holistic goal provides guidance for this question.
- What is enough? Should transfer planning be about getting the most money or the most value for the family’s desired outcome?
- What is equitable? Equal is not the same as equitable. Equitable helps us return to the values of each asset and what is the most appropriate transfer to preserve the values of the whole.
- Which assets and which management should be transferred to whom? You can transfer management to one person and assets to another. What are the values that can be supported through appropriate structure of management and asset transfer?
- Is keeping working lands working a key value? It may be easier to sell the assets that may lead to your working land not being used for agriculture in the future. How important is maximum money and ease of asset transfer to you? How important is keeping the land in agricultural production important to you?
There is nothing like learning from other people’s experiences. We selected some of the stories from your network that highlights the structures and tools used by the older generation to make sure that they could transfer the management and assets to the younger generation while creating the legacy that wanted to pass on through shared values including:
- Gabe and Shelly Brown and how they have gone about planning and implementing their farm transfer to their son, Paul, while considering other asset transfer to their daughter, Kelly.
- Dave and Kay James and how they sold off part of their land and put the rest in a conservation easement to protect the land that is kept in agricultural production by their adult children who each operate individual enterprises while utilizing an LLLP to make decisions about the joint assets shared by the family.
- KTS Farm and how they worked out a lease and purchase arrangement with an employee after first supporting a management transition.
- And numerous other case studies to consider other management and asset transfer options.
It is a given that every family will experience at least one of the “5 D’s.” As the saying goes, there’s nothing certain in life except death and taxes. But families may also experience divorce, disability, disaster, and disagreements. The ability to weather those storms successfully, by keeping the values of the family and business intact, increases when a family had these different components of a transfer plan completed within the context of a holistic goal.
Transfer planning is the type of planning that falls into the categories of “Important but Not Urgent” for most people (as articulated by Stephen Covey). However, if not done in time, it can become “Important and Urgent,” and, in many cases, can result in broken relationships, financial problems, and added stress to all involved. Because transfer planning brings up many emotionally charged issues, working with a facilitator skilled in consensus building, Holistic Management, or other communication tools can help the process go more smoothly, reduce the time it takes and give you better results in the end.
Because of the inherent complexity of the process, transfer planning is not something to try to do on your own. You will need a resource team of professionals to help you create the needed documents. You will want to be sure your personal legal and financial advisors agree that the plans you create are aligned with your intentions.
Transfer planning can seem daunting because of the multiple plans involved, but we hope your transfer plan provides the legacy you want to give to your family and community. Leading with your values and your vision is an invaluable part of the communication that is required for an effective transfer. Because your holistic goal engages your family in a value-based discussion it helps your management team articulate the values and desired outcomes now and into the future, as well as define the key behaviors and systems necessary to create those outcomes.
While having a holistic goal and vision for the family and the business improves communication, the decision-making testing checklist is a valuable tool that can help guide the development of your plans and continue to improve communication within the management team. Testing and monitoring decisions helps ensure you are addressing human, natural, and financial resources, adapting to changing circumstances, and minimizing unintended consequences. Monitoring also helps ensure that you update plans as situations change, new people are added to the family and business and others move on. When children, partners, and/or employees join the business, they too become part of the decision makers managing the land and business holistically.
Statistically, 30% of farms/ranches pass from the first generation to the second. Of the second generation, only 12% pass to the third generation. And, only 3% pass from the third to the fourth generation. By doing this transfer planning work to create a viable transfer plan, you can help reverse this trend of working lands not being kept in production.
Farm and ranch transfers can be particularly challenging with the intertwining of people’s homes, childhoods, career development, business opportunities, and personal and business assets. With the increasing loss of agricultural lands to development pressure, the need to keep working lands working is greater than ever. Providing opportunities for the next generation of farmers and ranchers through successful farm/ranch transfers will help support your family and your local community while leaving a lasting legacy for years to come.
Don Campbell, a Holistic Management® Certified Educator and someone who has used Holistic Management to help develop his transfer plan articulates the rewards of that planning well: “I have had a most successful inter-generational transfer from me and Bev to our sons and their spouses. This would not have happened without Holistic Management. We wouldn’t have had the financial or people skills to make it all work. I enjoy the fruits of that transfer daily.”
Get your copy of Leaving a Lasting Legacy: A Holistic Approach to Farm/Ranch Transfer Planning today!