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There are two sets of goals to establish when succession planning: goals related to the future of your ag operation and goals related to your own retirement.
In the new guide Succession Planning 101 from FBN® Finance, we walk you through the business logistics of protecting your farm’s future while simultaneously helping you keep an eye on what you personally will need in retirement. Download the free guide here, and continue reading below.
Determine what matters most to you when it comes to the future of your estate. A few questions you may want to ask yourself include:
If your goal is to keep your ag operation within the family, you’ll need to determine if your family has the same vision and skill set.
How will you address if only some of your children want to keep up the operation or if all of them do but are not interested in working together as a team? If you do not have children or descendants interested in maintaining the farm, do you have a cousin, niece, or other interested family member of working age you would entrust your estate to? Are there any expectations or conflicts within the family that need to be resolved?
If you prefer to use the farm to finance your retirement, you can consider whether you’re interested in renting the land or selling it.
Renting can be more of a time investment, but could be a good option if land rates are currently low; even if you go this route, though, you will still need to name a successor. If you plan to sell, consider whether there are any repairs or upgrades you’ll need to make on your property in order to achieve a higher rate of return.
While succession-planning discussions primarily focus on the future of your farm, prioritize discussions regarding your personal future so that you can better secure the retirement you envision.
If you have a spouse, factor in their retirement desires, needs, and contributions, ensuring that they are part of all succession-planning discussions and that they have legal rights to assets not gifted or sold should they outlive you.
Likewise, if you have any dependents, such as a severely disabled adult child, you will need to plan for their financial future as well as who will become their legal guardian when you are no longer able to care for them.
You may have been investing in a retirement plan throughout your working career and have enough saved to retire comfortably. Or, you may be part of the 60% of farmers who did not contribute to a retirement plan. How much, if any, will you need from either a stake in the profits or the sale of the property?
If you’re keeping the farm within the family, will you continue living on the farm property, and if so what financial obligations will you have for doing so? If you negotiate for a financial stake in the ag operation, how much authority will you have in operational decisions after you execute your succession plan?
Research your options and budget for healthcare, such as Medicare, keeping in mind that you may have greater expenses as you age. If you are intending on staying on the farm property, you may need to consider whether you need to move out of the main residence and build a new residence and whether it needs to be made more accessible in case mobility becomes an issue in the future.
Starting your succession planning early can be a benefit to you, your family, and your farm. In Succession Planning 101: 4 Steps to Protect Your Farm’s Future, we demystify the complex process of handing over your estate when you retire.
Within the four steps outlined in this free download you'll receive lists of the documentation you should compile, tips for how to find advisors, and insights on managing your successors' expectations.
During your succession planning, you may consider making improvements on your farm. The loan advisors, analysts, and closers at FBN Finance can help answer your land loan questions. We offer creative solutions to financing needs across the country.
Call us at 844-200-FARM or click the button below to apply for a land loan to purchase land or make improvements on your existing property.
"At some point in time, you've got to look at transitioning the farm over to somebody else. A lot of local banks just don't want to work with the young people, and I think FBN's pretty open minded on making things happen and setting things up for the next generation to come in," says Steve Gerfen, a farmer in Ohio whose son Nole is also a farmer.
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