Farm and Ranch Planning – Getting Everyone on the Bus
In his popular book Good to Great, author Jim Collins teaches that in business you have to have the right people on the bus and in the right seats – or in other words, you have to have the right people as employees and then have them doing the right jobs. A similar idea is important in planning for the transition of the family farm or ranch. We have to have all of the right people involved in the process and they have to be doing the right things for it to work. One way this manifests itself is with the need to figure out who actually owns “the farm.” A situation con commonly exists where the “Farmer” who his looking to transition the farm to his or her child, is still waiting to inherit some, or all, of the farm ground or other assets from his or her parents.An example of this occurs in the following situation: Bob and his wife Joan have “owned” a dairy and associated ground for nearly thirty years. Bob and Joan now want to retire and begin the process of transferring the farm to their son Kevin. However, as we start working on the transition plan, it is discovered that Bob’s father, James, still owns several parcels of land that are central to the dairy operation. When we discuss the matter with Bob and Joan, they say: “Oh yeah, but Dad has said that the ground will be ours when he passes away.” To verify, we ask Bob and Joan to get a copy of James' estate plan. James is a little hesitant to give Bob a copy of his estate planning and assures him that it is definitely all in order as it was prepared by his longtime friend and attorney. The attorney is a really good attorney, but is a general practitioner who doesn’t have a lot of experience in estate planning.After some coaxing, James relents and provides a copy of his Will. In reviewing the document, we discover that it is a fairly standard Will prepared from a form book and doesn’t address the farm in particular. Rather, the Will states generally that James’ assets will be divided equally between his four children. By working with James and his attorney we are able to bring James into the process and ensure that the transition through Bob and Joan to Kevin can occur as everyone expected and desired. If James had not been willing to cooperate, it is likely, Bob and Joan or Kevin would have been negotiating after James’ death with Bob’s siblings to regain control of the ground that was central to the farm operation.This story is a common one and is meant to illustrate the inter-generational aspect of planning for the succession of a farm or ranch. Often the operation has been built over time by a combination of gifts, promised inheritance and third-party purchases. The planning isn’t just from one generation to the next but can involve multiple generations. When planning for the transition of the family farm, it is important to make sure all of the relevant parties are on the bus and in the right seats so that the desired outcome can be achieved.