For farm transfers to be successful, all parties involved should have an idea of how they want — or don't want — the farm's assets to be used, says Gary Hachfeld, University of Minnesota Extension ag business management specialist.
“With proper planning, you can mitigate some of the risks” of events like lawsuits or divorce, he says.
“Then those wishes need to be put into legal documents so there is no shadow of a doubt what the intent of either party is.”
Farmers should have two separate, compatible documents drawn up: a farm business transition plan document and a personal estate plan.
“A problem in one document can cause a problem in the other,” Hachfeld says. “For example, if the personal estate plan doesn't complement and support the farm business transition plan, it can negate or completely nullify the transition plan and the assets could go somewhere totally different.”
The older generation must also be ready to give up not only ownership of the assets but also control and management of the business.
“Both have to be accomplished before you have truly transitioned the business on to the next generation.”
Some older farmers opt to stay involved by forming some type of business entity and owning shares in the entity. “But, again, the day-to-day decision and management, if they're truly transitioning the business, should be in the hands of the younger generation.”
Hachfeld and colleagues have offered farm transition programs in Minnesota and surrounding states, usually sponsored by local businesses. For information, visit swroc.cfans.umn.edu/ or contact Hachfeld at 507-389-6722 or email@example.com.