In light of the ever-present concern over changes in estate tax laws and recent market volatility, many farm families are sitting down this winter to revisit or perhaps start their planning. We all know that most often, the farm business is part of a family’s legacy. Of course, successfully transitioning the farm business is a critical goal for families who have identified a natural farm successor. Often, the planning process involves multiple generations. This might include the senior generation passing the farm to the middle generation — and perhaps a younger generation beyond that. Many times, the communication style is different in each generation, so bridging that gap is essential in the planning process.
What is important to each generation
One thing we can all understand is that a lack of planning in the senior generation may lead to a more difficult planning process for the middle generation and younger generation. According to the most recent data from USDA, the average age of a U.S. farmer is roughly 58 years old, and the average age of the beginning farmer is 46. What does this mean? Most likely, the middle generation has identified their own potential successor. Understanding each generation’s visions, goals and values is critical when developing a plan that will leave a lasting legacy.
For many years, I have had the opportunity to participate as a panelist in the Iowa Farm Bureau Take Root (succession planning) program offered to Iowa Farm Bureau Federation members across the state. The administrator of that program is Amanda Van Steenwyk, IFBF farm business development manager. The program is interactive, and all family members involved in the operation are invited to attend. During the presentation, attendees are asked to identify the generation they belong to and list what is important to them in planning. It is always interesting to learn the perspective of each generation. There are some common concerns that are routinely mentioned in this process.
The senior generation. According to Van Steenwyk, the senior generation often wants reassurance that the middle generation will pass the farm down to their children, and that the younger generation is interested in continuing the farming legacy. They are often concerned about financial security in their retirement as well as a plan for addressing their health and care needs that might come up. Typically, the senior generation wants to provide a legacy that is fair to all family members. Thus, they may be interested in listening to options in achieving an equitable result. They may also want to understand the business plan of the middle generation — and whether the operation needs to grow to accommodate the younger generation.
The middle generation. The legacy of the senior generation is very much in the hands of the middle generation. Van Steenwyk says, “The middle generation is typically getting to the age where they want to do their own planning and need more communication from the senior generation.” The middle generation may feel paralyzed in the planning process because of a reluctance from the senior generation to plan, or communicate the plan. In that regard, the middle generation is asking the senior generation for assurance that they plan to fully transfer management and eventually assets to their generation. Thus, the main concern from the middle generation is that they will lack the control to pass the farm to their heirs and achieve a lasting legacy.
The younger generation. Sometimes referred to as the “millennial farmers,” the younger generation is looking for patience from the senior and middle generations. They want to gain experience by developing their skills and knowledge of the operation and farming. “The younger generation wants to be a contributor to the operation,” Van Steenwyk says. “That could mean being involved in some management and decision-making. They want a chance to contribute, and not just be a hired hand.” The younger generation is open to investing in and exploring new technologies, and expanding the operation to create a place for themselves. They may have access to beginning farmer loans to start that process.
Why it's important to involve each generation
Regardless of the generation differences, the need for open communication is common to each generation. According to Van Steenwyk, “The bottom line is that each generation ultimately wants the same thing. They just might not communicate it in the same way. It is important to be intentional about involving everyone in the planning process so questions can be asked, and issues can be addressed. The goal is that at the end of the process, everyone knows what the plan is and sees their place — including on-farm and non-farming heirs.”
Research and experience show that farm families who do not communicate are less likely to achieve a successful transition. Going through the process of identifying what is important to each generation is a key component to making sure there isn’t a communication gap.
Herbold-Swalwell is with Parker & Geadelmann PLLC. Email her at firstname.lastname@example.org.