“What happens to the family farm?” is a question that commonly comes up after an unfortunate accident or death, which can add stress and tension to an already difficult situation. However, it’s ideal to create a plan early so the farm can pass more smoothly to the next generation. Common terms used for this process include succession planning, estate planning and exit planning.  

Key questions to consider include:  

Ownership Goals: How do the current owners want to be involved in the business in the future?  Do the owners want to continue living on the farm? Do they want to retain ownership of any land?  Will the operation (as a whole or pieces) transfer within the family to the next generation (heirs)?  

What needs to be transferred? This needs to be broken down into three separate categories:  

• Land: Current ownership, value, lease agreements and any liens against it. 

• Equipment: Condition, ownership, and what it is used for.  

• Management: Current management of operation, clear expectations on how decisions are made and by whom, and grain or livestock contacts.  

Timeline: Does the current management/owner have enough saved for retirement? What are the healthcare plans? Are there deadlines that would affect the new management/owners?  

It is also important to bring together an advisory team to help the work through the transition process. While each transition process will be a little different, the advisory team should include the following professionals: a lawyer, accountant, lender and a business management advisor. Professionals can help facilitate the current owners’ transition goals related to financial security for a surviving spouse and options for minimized taxes and fees related to asset transfers. KCARD can help Kentucky-based agriculture businesses through this process by serving as a business management advisor.  

These conversations are never easy but some basic steps to help get the process started are:  

1. Call a family meeting with those who would be directly involved 

2. Create an advisory team  

3. Agree on business and ownership goals  

4. Create a list of all assets and debts 

5. Gather all key documents (wills, property deeds, stocks/bonds, bank notes, etc.)  

6. Create and agree on a timeline for the process from start to end  

7. Implement the plan.  

The University of Kentucky has pulled together a series of publications to help people with both their personal and business estate planning. Part One can be found here FCS5-420: Estate Planning: Getting Started (uky.edu) and the whole series is available here Family Resource Management | Family & Consumer Sciences Extension (uky.edu).  

If would like KCARD’s assistance with your agricultural business’s succession plan, contact us at (859) 550-3972 or kcard@kcard.info.