Three parts to a successful farm plan

Farmers and ranchers need to create three plans to effectively and efficiently transfer the management and ownership of their operations to the next generation — the estate plan, the transition plan and the retirement plan.

These plans work together to meet the basic needs of keeping the family a cohesive unit and keeping the farm sustainable.

Estate plan

To start with, let’s recognize that everyone has an estate plan. Although it may not be the plan we want, all assets have a distribution method tied to them. I call them the Estate Planning COPs.

“C” is for contract and is the first way assets are distributed. Contracts can be found in any policies or accounts that have a beneficiary tied to them. Items like life insurance policies or retirement accounts have a beneficiary designation.

This may affect a farm operation if a life insurance policy was bought to help a returning heir buy the farm from their siblings or pay off existing debt, or if the funds from a retirement or investment account are supposed to go to the non-farming heirs.

The good news is that the beneficiary documents can be easily updated to accomplish the goals of the family.

Ownership is the second step in asset distribution. Any asset with a title has a transfer distribution plan. Titles can represent ownership transfer between joint owners or indicate ownership by a trust or a business entity.