Begin 10 years ago or start today

Photo courtesy of Anna Hunter/sxc.hu.

When the time comes to transfer your farm to the next generation, who will do it and how will it be done? From helping you talk with the members of your family to deciding how your land will be used to determining who gets what of your farm’s assets, the nonprofit Land for Good, based in Keene, N.H., and operating throughout the New England states, can help. Using a series of printed materials and through discussions with you and your family, Land for Good can help you resolve issues surrounding farm transfer before you begin the legal and accounting tasks. With one notable exception, Land for Good asks the questions and you supply the answers. The exception: When is the best time to begin planning for the transfer of a farm? To that, Bob Bernstein, founder and co-director with Kathy Ruhf of Land for Good, has an answer. It is, he says, like planting a fruit tree. The best time to begin the process of farm transfer is 10 years ago. The second best time is today.

Getting started

Not every question will require research. In fact, many answers are ones you already know. Who owns your farm now? Who operates it? Who do you think will want to carry on once you no longer want or are able to farm? Who is interested in how your farm and your land will be used in the future? How would you like to see your land used: farm, houses, woodlot, recreation, shopping center, land trust? All or none of the above?

What is a farm asset?

The land, your home, two barns, three tractors, a dairy herd, a flock of chickens? The antique farm machinery in your shed? Grandpa’s milking stool? What about the good name your farmstand has earned throughout the years? A farm is not only land, but also a family and a business.

Talk

Perhaps the most important factor in planning for the transfer of a farm is the willingness of all involved to talk with one another. What is your role? As the “exiting generation,” when and how do your wishes count? Can the family agree on future uses of the farm? Will you continue to be involved in some way? If so, how? Will you be an adviser, an active worker, the person responsible for a limited function, such as raising replacement calves or operating the farmstand? Will you participate financially? In what way? Or do you want to sell all your financial interest in the farm and use it as your retirement income?

In the course of discussions, initial assumptions about the role of each family member may change. While the son who left the farm to work in town may initially be thought to have no interest in farming and the daughter who has remained considers herself the farming successor, open family communications may lead to other conclusions. As a member of the “entering generation,” what role does the off-farm worker envision for himself? Does he want to work the farm either full or part-time, have a role as an adviser, claim a financial interest in his childhood home? Does the farming daughter consider the farm to be primarily hers? How many people can the farm support financially?

In the last three years, Bernstein and Ruhf have worked on some 100 New England farms, coaching families and others throughout the process of transferring their farms from one generation to the next. Many of the transfers have been within families, but some have not. As they help with farm transfers, Bernstein and Ruhf approach with honey, not vinegar (or fear), to help the partners in the transition define their financial, planning and lifestyle compatibilities. As Bernstein points out, people who choose to farm have much in common. They have independent spirits, as well as a love of the outdoors, a strong interest and ability in solving problems, and a desire to produce something tangible that is good not only for themselves, but also for their families and communities.

In order for the farm transfer process to work out well, both the exiting and the entering parties must be able to agree on their individual financial interests and those of the farm. The financial interests must, however, be financially feasible for all concerned. Great family communication in which the expectations of all parties are met is the best indicator of success. However, even families in which communication is difficult may come together through the farm transfer process. Bernstein points to one family in which some members who had not spoken to each other in years were able to reconcile when their farm was on the verge of being lost to the family and going out of agriculture. Through the transfer planning process, a family member, with the support of other family members, was able to put the farm back into operation. In another situation, children who had previously evinced no interest in farming decided on limited roles with a long-time farm employee continuing day-to-day operations.

A plan for land transfer

Included in Land for Good’s comprehensive farm transfer process is help through coaching sessions:

•Personal, family and business goals

•Business aspects of future farming operations

• Land use options

•Retirement planning for the transferring generation

• Estate assets and preservation of value for beneficiaries

• Management and transfer of farmland, buildings and other assets from one generation to the next

Bernstein is careful to point out that his role is as a coach, not a mediator. The coaching process itself is designed to save money. Knowing what they wish to accomplish, families can ask attorneys and accountants how, not what, to do. Attorneys and accountants can then help families keep the value of their assets and maximize the value of those assets within the family.

The farm transfer process may take as little as four months (if the family has already made major decisions) or as long as two years. Land for Good offers an initial free consultation. Following that is a getting-ready package to help sort out issues and get organized ($300). Also available is an assessment that includes a two-hour on-farm meeting followed by a written summary together with the plan’s next steps and a suggested timeline ($600). The timeline includes ranking of the most urgent items together with other steps that can be taken either concurrently or separately. Land for Good also offers a full package, including coaching through all steps of the timeline. The fee for the full package varies depending on the time involved, but may range from $1,200 for a less complicated situation to $2,900 for a transfer that involves trusts with multiple agreements.

Some words for exiting farmers

Although financial matters may be difficult, transfer of management, according to Bernstein, is the hardest part. Accepting that your daughter or your son will be deciding what to plant or what changes to make to the herd may not be easy. “But, retirement does not mean the end,” says Bernstein. “Think of retirement as changing your relationship with what you are doing. If there are things you do on the farm that you want to continue doing (such as raising calves, haying or mentoring), include that in your farm transfer agreement.”

Options begin now

While acknowledging that getting started is the most difficult part of the farm transfer process, Bernstein points to the advantages. The sooner planning starts, the more options are available, not only for yourself but also for the farm. Not starting is itself a choice. “If you don’t make the decisions that need to be made and get them into legal documents that will transfer your property to the kind of successor you want, others—legal processes and/or state and federal governments—will decide for you. In Bernstein’s experience, the process is best begun by the time the transferring generation has reached their 50s.

Whenever it is done, handing off your farm and seeing it used well can be your best reward. “Engage in the planning process, make the decisions you want,” says Bernstein, “because this is your best chance to create the legacy you want for your land.”

Further information

Land for Good
29 Center Street
Keene, NH 03431
603-357-1600
www.landforgood.org
info@landforgood.org

Kathleen Hatt is a freelance writer and editor and a frequent contributor. She lives in Henniker, N.H.