Commentary: Plan now to ensure the family farm surives for generations
Family farms and ranches provide income, purpose, opportunity, a sense of history, a home—often for multiple generations—and a future. The trouble is, too many farm families overlook or put off developing a transition strategy so the business can survive from one generation to the next.
This failure threatens not only the viability of the family business, but also the very fabric of agriculture, particularly in California where operating costs, government regulation and development pressures create an unforgiving business climate.
And, while this vulnerability may seem obvious, California farmers and ranchers, like thousands of small business owners across the nation, have for various reasons shied away from developing formal succession and estate plans. In today's world, that leaves the family farm and irreplaceable agricultural assets at great risk.
It also sets up an unprepared next generation for personal and business failure. We've all seen family businesses fall apart after a family leader dies.
So why aren't more farmers and ranchers rushing to get help developing a good succession and estate plan?
One of the biggest reasons is fear. It's hard to talk about the time when you won't be here. It's hard to sit down with family members and express what you truly want in the future for yourself, them and the family farm.
Another problem is not recognizing that personal or philosophical differences between family members who will inherit the farm or ranch are a business advantage, rather than a liability.
And there's always the unspoken fear there won't be enough to go around when a loved one dies—not enough money or land, not enough love and acceptance among surviving heirs, not enough room within the family system for individuals to be themselves.
Then there are issues related to letting go. Transferring control of a business that one has spent a lifetime building means change, which can be frightening—and not just for farmers and ranchers, but for all of us.
There's no way to sugarcoat the issues of family business succession planning. It takes hard work, commitment to honesty and a willingness to accept the discomforts of change, as well as the investment of considerable time and money to develop and maintain these plans.
Through good planning, you and your family can better describe the legacy you've built by weaving together the values, emotions, relationships and personalities found in your family. These plans also can help channel ambitions, struggles and successes in positive ways.
To articulate your family legacy in your succession and estate plans is to provide unique guidance for succeeding generations. To do that successfully usually means consulting professional advisors who will help you tackle the unspoken issues. They can help create strategies that protect farm and ranch businesses and carry assets forward from one generation to the next.
This is crucial on a number of levels. Research shows intergenerational transfers of wealth are the primary way capital is accumulated. The effect of these transfers on the nation's overall economy isn't well understood, but some data suggest that estate taxes may distort investment and employment decisions of family business in ways that slow national economic growth.
Other research indicates that not having strong succession plans—plans that anticipate change and hold long-term strategies—have the effect of discouraging entrepreneurial risk and innovation and therefore business expansion and development.
As Americans, we are now in the midst of not only handing down the family farm, but also of transferring to future generations the greatest accumulation of wealth in the history of the world—an estimated $26 trillion.
Because so much is at stake, the time to plan for the future and protect the family farm is now.
(Caroline Berry is a business consultant with more than 30 years of management and leadership experience. She may be contacted at email@example.com.)
Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.