Legacy Planning

When Risk in a Crisis Becomes a Turning Point: Lessons from Top Producers

Wed, 25 Feb 2026 16:51:43 GMT

In a volatile agricultural landscape, risk is a constant. Weather, markets, input costs, succession issues, cyberthreats and pandemics all push farm families into uncomfortable decisions. During the “When Taking Risk in Times of Crisis Pays Off” panel at Top Producer Conference, six producers shared how they’ve navigated those moments — and what they’ve learned when the stakes were highest.

The panel, moderated by Rena Striegel, president of Transition Point Business Advisors in West Des Moines, Iowa, included: Edward and Rebecca Dalton, of Dalton Farms, Wakeman, Ohio; Chris Payne of 3B Hay & Straw, Ontario, Ore.; Wendy Alsum Dykstra and Heidi Alsum Randall of Alsum Farms and Produce, Friesland, Wis.; and Ron Rabou of Rabou Farms, Albin, Wyo.

Their stories spanned family tragedy, ransomware, COVID-19 disruptions, organic transitions and bold expansion moves — offering a candid look at what it really means to take risk in agriculture.

Here are five key takeaways from the conversation:

1. Crisis as a Catalyst, Not a Dead End

For several panelists, a crisis didn’t just test their operations; it forced a complete re-evaluation.

The Daltons describe being emotionally exhausted and financially stuck before a Top Producer event pushed them to question everything.

“We were floundering in agriculture,” Rebecca says. “We were not making any money, really. We were just doing it to do it and to continue that legacy. And we were to the point where, like, ‘why are we doing this?’ You know, we only have so many days here. We only have so much time here.”

After a series of family tragedies and persistent unprofitability, they made a bold move to transition about half their acres to organic production. The shift brought much-needed profitability and renewed purpose.

“The risk was I was going to quit farming,” Edward explains. “We needed something and a spark and to just want to farm again.”

In Wyoming, Rabou’s turning point came after the sudden death of his father and the unraveling of a complex family ranch structure. Walking away from a fifth-generation operation was emotionally painful, but necessary.

“We did a lot of soul searching, and I kind of came to the conclusion that the risk for me for not doing something was much greater than actually doing something,” he says.

Rabou and his wife started essentially from scratch, building an organic grain operation and a hunting enterprise, borrowing heavily despite having grown up in a “never borrow” mindset.

2. Numbers Matter — But They Aren’t Everything

A recurring theme was the importance of knowing your numbers while recognizing data alone cannot drive every decision.

“Knowing our numbers is what really helped us,” Edward explains. “If you know your own data front and back, when you really get into those tight situations that you need to be able to think and move… sometimes you just have to move, whether you want to or not.”

Recently, the Daltons made a bold move back to conventional production. The Daltons’ choice to step out of organic was a conscious decision to go against what the spreadsheet said, in favor of their family and team.

“Right now, when I’m hauling $12 beans instead of $40 beans, like we were for a few years, I’m not really happy with that decision, but it was too much time,” Edward explains. “We were losing time with our boys, and that ultimately is why we went back, even though we were making more money per acre.”

Rabou emphasizes having a clear philosophy about leverage: “I have no problem borrowing money on appreciating assets, but I have to be very careful about borrowing money on assets that depreciate.”

For him, land and infrastructure are long-game investments, and he admits he more often regrets the risks he didn’t take than the ones he did.

“I’ve never looked back and said I shouldn’t have made that investment,” he says. “But I have looked back a multitude of times and said, ‘Wow, I wish I would have made that investment.’”

3. Fear vs. Action: Moving When the Window Opens

Panelists agree that fear is often the biggest barrier to seizing opportunity — especially when decisions must be made quickly.

Oregon onion grower and packer Payne describes how, in the middle of a tense meeting, he and another young partner were essentially challenged to buy out older shareholders in an onion packing facility. They had seconds, not months, to commit.

His broader advice to producers now: “Don’t get caught up in fear. If you let fear dominate your thought processes, you’re never going to succeed.”

Preparation helps in those “15-second” decision moments, Payne adds. Continually learning, attending conferences and thinking through scenarios ahead of time gives you a framework so you’re not starting from zero when opportunity knocks.

Edward adds, “You absolutely know how it’ll go if you don’t try. If you’re not willing to try, it’s not going to work. You can’t move forward if you don’t do something or try.”

4. Cyberattacks, COVID-19 and the Power of Systems

For Alsum Farms & Produce crisis came in very modern forms: a ransomware attack and then the COVID-19 pandemic.

“At 3 a.m. one morning in October, I got a call from our IT manager that we had been hit with ransomware,” Wendy explains.

She explains recovery from the attack required all hands on deck, multiple external experts and months of work to protect traceability and keep product moving. The aftermath included layered backups, new server and email security, user training and an ongoing relationship with cybersecurity and insurance professionals.

Just months later, COVID-19 hit. With 90% to 95% of their business retail-focused, the Alsum team quickly formed a COVID-19 response group, redesigning workflows to keep employees safe and shelves stocked.

The sisters say one key result from COVID-19 was when another supplier faltered, the Alsums were ready to step up for a major retailer — turning crisis into opportunity.

5. Relationships as a Strategic Asset

Beyond capital and land, the panel underscores the value of relationships — with peers, competitors and buyers.

Edward, Payne and Rabou maintain a group text, often used when one of them is wrestling with a big decision.

“Have people in an industry that you can trust and communicate with,” Edward stresses. “There’s been days they’ve literally had to walk me off a ledge when I’m trying to figure out how to make a decision.”

In the potato and produce world, Heidi says, competitors often become collaborators when the chips are down.

“The nice thing about the potato industry and the produce industry in general that we’ve experienced is that it’s been very collaborative,” she explains.
Rabou adds he sometimes sells grain below top price to maintain long-term relationships and outlet security.

“Those relationships to me are more important than making the dollar in the moment,” he explains.

His broader warning to producers is to stop comparing your operation to your neighbors’.

“You really have to determine what works good for you as an individual, you as a couple, you as a business,” he stresses. “Stop paying attention to what everyone else is doing.”

The Bottom Line from Top Producers

Across all their stories, the panelists echoed a few core principles:

Know your numbers but also know your values.
Act in crisis — don’t let fear make the choice for you.
Be willing to pivot, even away from something profitable, if it no longer fits your life or strategy.
Invest in appreciating assets and in relationships, both of which can pay off long after the crisis has passed.

In short, risk in times of crisis isn’t just something to endure; handled intentionally, it can be the turning point that reshapes a farm for the better.

It's Time To Lead: Strong Succession Won't Happen By Accident

Wed, 11 Jun 2025 21:56:18 GMT

Succession planning isn’t just a checklist item — it’s a defining leadership moment. As a farm or ranch owner, it’s time to stop waiting for the “right moment” and start leading with purpose. You’re not just passing on assets; you’re shaping the future of your operation. That means stepping into the role of leader with clarity, courage and commitment.

First, take a hard look at what kind of leader your farm needs. Are you focused on daily operations or vision and growth? Are you modeling strong financial discipline and decision-making? Are you addressing conflicts head-on and keeping your family aligned? Leadership requires more than technical skill; it demands the courage to tackle tough conversations, whether with partners, successors or family members. Great leaders don’t shy away from discomfort; they lean into it with the goal of building stronger relationships and a more resilient operation.

Communication is foundational. If your team doesn’t know what’s happening, how can they help move forward? Hold regular family meetings, define decision-making roles and ensure everyone understands their responsibilities. Avoiding conflict only leads to confusion. Structured, transparent communication builds trust and keeps succession planning on track. Communication is also how you build buy-in from the people who will carry your operation forward.

Leadership Isn’t Handed Over

Next, you must actively develop your future leaders. Don’t wait until you’re ready to retire to begin mentoring. Give your successors meaningful responsibilities now. Let them learn by managing projects, participating in financial discussions and handling day-to-day operations. Leadership isn’t handed over — it’s earned through real-world experience and demonstrated commitment. Every season serves as an opportunity to develop those skills and test readiness.

Set clear standards for advancement. Define what success looks like: required experience, education and financial knowledge. Make sure successors understand what it takes to lead and hold those leaders accountable. If someone isn’t ready or is unwilling to step up, be honest. Your farm’s legacy deserves strong, prepared leadership.

Succession planning is hard. Many families stall out due to fear, conflict or lack of clarity. But real leaders don’t quit when times get tough, they face challenges head on. If your planning has gone off track, reset. Re-engage your family, bring in outside support if necessary and commit to consistent action.

The future of your farm depends on your leadership today. Will you linger in uncertainty, or will you lead with confidence? Strong succession isn’t going to happen by accident. It’s driven by leaders who are willing to plan boldly, act decisively and invest in their next generation. Your family and your operation are counting on you. Be the leader they need.

Your Next Read — Quiet Crisis, Unfolding Rapidly: Big Questions Remain For Next Gen Farmers

Long-Term Care: Affording it Without Losing the Farm

Tue, 22 Apr 2025 11:44:57 GMT

Long-term care (LTC) is expensive, unpredictable and often not covered by programs like Medicare. For farmers who’ve spent a lifetime building an operation and want to pass it on, the rising costs of LTC present a real financial risk to the land, the farm business and the legacy.

How do we pay for long-term care without losing the farm? This question is one many farm families worry about.

“It’s one of the most common — and important — questions farm families ask when thinking about the future,” explained Robert Moore, Ohio State University Agricultural & Resource Law Program Attorney, in a recent release distributed by Ohio State.

Moore shared these facts about LTC costs and strategies:

The growing risk of LTC
Once upon a time, estate taxes were the biggest financial threat to the family farm. Today, that’s no longer the case. With higher federal estate tax exemptions, few farms owe estate taxes anymore. The real financial threat now? LTC costs.

LTC includes a wide range of services — from home-based personal care to skilled nursing facility stays — and most of it isn’t covered by Medicare. These services help people with chronic illness, disability or aging-related conditions. For example, assistance with dressing, bathing, eating or even just getting around. Care might start at home and eventually move to a facility. Costs vary by setting and service, but they add up quickly.

Here are a few important facts to help understand the implications of LTC on farming operations:

69% of people older than 65 will need some form of LTC.
Average LTC lasts about three years, with women needing slightly more (3.7 years) than men (2.2 years).
20% of people will need care for more than five years — these are the “outliers” most likely to face LTC costs that can jeopardize the farm.
In Ohio, a year in a nursing home will cost around $100,000 or more.
For a farm couple, those numbers can double — and the risk of outliving income and savings increases.

Can the farm handle it?
If you’re wondering whether your operation could survive those costs, it depends on a few things:

Do you have income (from Social Security, retirement accounts, rent, etc.) that could help cover LTC?
Do you have non-farm assets, such as savings or investments, to use before touching the farm?
Would you be considered an “outlier,” needing care for many years — and would your current planning handle that?

In most cases, a farm family can survive average LTC costs, around $180,000, without needing to sell land and other critical assets. But it’s the outliers — the five-to-10-year nursing home stays — that pose the greatest risk. That’s where planning becomes essential.

Planning ahead: options for managing LTC risk
There’s no one-size-fits-all solution. But there are strategies that can help reduce LTC risks and protect the farm. Here’s a breakdown of the most common options:

Do nothing
For some, doing nothing is a valid strategy if they have enough income and assets to cover even the worst-case LTC costs without risking the farm, but that’s rare. Most families should at least consider other options.
Gifting assets
Giving land or assets to heirs (usually children) more than five years before applying for Medicaid can protect those assets from LTC costs, but gifting comes with trade-offs:
1. You lose control over the assets.
2. The heir receives your original tax basis, which could trigger big capital gains taxes later.
3. If you need LTC during the five-year look-back period, the gift can cause Medicaid penalties.
Gifting can be effective — but it needs to be done carefully and early.
Irrevocable trusts
An irrevocable trust can protect assets while allowing some flexibility. You give up ownership and control, but the trust (managed by a trustee) holds the asset for your beneficiaries. If structured correctly and established early enough, the trust assets are shielded from LTC costs — and sometimes still qualify for a stepped-up tax basis at death.
But be warned: these trusts are complex, expensive to set up, and must be carefully maintained.
Wait-and-see approach
This strategy avoids doing anything upfront but relies on having enough income and savings to cover five years of LTC if needed. If care becomes necessary, assets are transferred and the clock starts. The gamble? If you can’t make it through the five-year penalty period, your assets might still be at risk.
Self-insurance
Some families choose to earmark a piece of the operation (a less productive farm, a savings account, etc.) to pay for care if needed. It gives flexibility and control, but it also requires discipline — and can lead to one spouse living more frugally out of fear the money won’t last.
Long-term care insurance
LTC insurance can cover all or part of the costs — and newer “hybrid” policies can include a life insurance component so the money isn’t lost if care isn’t needed. But these policies can be expensive and hard to qualify for, especially if you already have health issues. Still, they’re worth exploring with a good adviser.

So, what’s the best strategy?
The truth is, there’s no “best” option — just the best fit for your family’s goals, resources, health and timing. Some families will mix and match strategies. Others will lean heavily on one. The important part is that you understand your risk and make intentional decisions, not default to inaction.

Talk to an attorney and plan ahead
LTC is complicated. Medicaid rules, tax law, trusts and gifting penalties are full of pitfalls. One wrong move, even with good intentions, can backfire. That’s why it’s so important to work with an attorney who understands long-term care planning and farm operations. Also, start the conversation now. Don’t wait until a crisis hits. Planning ahead can make all the difference for your peace of mind today and for your farm’s future tomorrow.

Your Next Read: Talking About Transitioning Our Farms and Ranches

Four Ways for Farmers to Avoid Estate Taxes in 2025

Wed, 09 Apr 2025 18:11:16 GMT

Succession can be a very sensitive topic for farmers to discuss. Some farmers want their children to take over the farm and operate it in the same manner. Other farmers, either due to a lack of interested children or due to skyrocketing land prices, would rather sell the whole farm for a non-agricultural use such as neighborhood development. Regardless of anyone’s farm succession plan, everyone has at least one similar goal: minimize (or, ideally, eliminate) their estate tax burden.

Tool No. 1: Estate Tax Exemption
Generally speaking, an individual’s taxable estate includes all assets owned by that individual at the time of death, including assets owned through an LLC that the individual owns or through a revocable trust in which the individual is a beneficiary. So, if a farmer establishes a revocable trust that owned the LLC that owns the farm (a common probate avoidance-liability protection strategy), the farmer’s estate would still be deemed to own the farm, including its land (measured at fair market value), equipment, livestock, buildings, and so forth.

Unlike the other tools which will necessitate an attorney, the estate tax exemption is something that every taxpayer automatically utilizes at death. The estate tax exemption in 2025 is $13.99 million for individuals and $27.98 million for married couples. In other words, if an individual were to pass away in 2025 with less than $13.99 million in their estate, that individual’s estate would not be responsible for paying estate taxes. While Congress may change the law for 2026 and beyond, the estate tax exemption for 2026 is set to revert to pre-2017 Tax Cuts and Jobs Act levels, putting the individual exemption at approximately $7 million and the married exemption at approximately $14 million.

Even at these lower amounts, most farmers have nothing to worry about . Still, some farmers place estate taxes as their primary concern when conducting succession planning, so hopefully this first tool alleviates those worries.

Tool No. 2: Family LLCs
The estate tax exemption is reduced by any reportable gifts made during the decedent’s lifetime. In 2025, a donor must report to the IRS any gifts to individuals that are worth more than $19,000 and gifts to married couples that are worth more than $38,000. As such, a farmer can gift shares of their farm LLC to their children that are under the gift tax reporting thresholds over a period of time, ideally decades, to reduce their taxable estate once the farmer does pass away.

A few aspects of family LLCs are noteworthy.

The farmer should be gifting shares of the farm LLC that lack voting rights, which the IRS will view as less valuable than normal LLC shares, thereby allowing the farmer to gift a higher percentage of the LLC each year without exceeding annual gift tax limits.
Farmers with children who are married can conduct this strategy more efficiently than farmers with children who are not married. Moreover, the children who receive shares are not necessarily obligated to retain the shares – the children can sell the shares, including amongst themselves.

Tool No. 3: Internal Revenue Code 2032A
At its core, IRC 2032A allows for an additional estate tax exemption of up to $1.42 million in 2025 (i.e., thus increasing an individual’s estate tax exemption to $15.41 million and a married couple’s estate tax exemption to $29.4 million). Concisely, there are both pre-death and post-death requirements that must be met for the IRC 2032A increase to be utilized. The State of Washington Department of Revenue has a very readable frequently asked questions page on IRC 2032A which more comprehensively details the requirements.

With respect to just the high points, the decedent must have been farming the land for five of the last eight years of his or her life. Specifically, the decedent must have been providing ‘material participation’ on the farm, not just leasing land to third parties. The land and equipment used on the farm must also constitute significant percentages of the farmer’s estate. After death, the decedent’s ‘qualified heir’ (usually a child) must continue farming the land for the next ten years. Like the decedent, the qualified heir must materially participate on the farm – not just lease it out to a third party. If the qualified heir ceases farming operations at any point during those 10 years, the qualified heir will be personally liable for the estate tax burden and must pay it within six months of the deviation.

Tool No. 4: Irrevocable Life Insurance Trusts (ILIT)
For high-net-worth farmers who will not avoid the estate tax through the above tools, an irrevocable life insurance trust (ILIT) is an option. While both assets in a revocable trust and some life insurance policies are included in a decedent’s estate, assets placed in an irrevocable trust more than three years before death are not included in the estate.

For an ILIT, a farmer would set up an irrevocable trust, purchase a life insurance policy, and place that policy within the trust. When the farmer dies, the ILIT would receive life insurance proceeds that were excluded from the estate and distribute them to the surviving spouse or children in order to pay the estate taxes and otherwise provide liquidity to the farm.

ILITs can be very expensive, however. It will cost several thousand dollars for the initial document drafting to be done, and then anywhere from a few hundred dollars to tens of thousands of dollars for the annual life insurance premiums. In short, farmers who will never approach the estate tax exemption levels should not invest in ILITs.

Article written by Nicholas Brown.Brown, Nicholas. “ Four Ways for Farmers to Avoid Estate Taxes in 2025. “ Southern Ag Today 5(14.5). April 4, 2025

Your Next Read: Before Starting a Farm Transfer: A Farm Family Pre-Agreement

4 Quick Succession Planning Tips With Attorney Jim Angell

Fri, 23 Aug 2024 20:46:39 GMT

A farm’s succession plan is complex. And with ever-changing laws and family dynamics, it can be hard to make sure everything gets taken care of in the process. Kansas attorney Jim Angell recently joined the Top Producer podcast to share four things you should consider for your operation’s transition.

1. Trusts For Gifting
The IRS Lifetime Gift Tax Exemption is currently $13.6 million, but there’s speculation that limit could be cut in half in 2026. If you’re going to be gifting a considerable amount before the end of next year, there are two types of trusts he recommends putting in place.

“We might use an entity, an LLC or Limited Partnership, and do some transfer gifting on that,” Angell says. “Or, we could use what’s called an Intentially Defective Trust. That allows you to maintain the income at the first level, freeze the assets and pass those on to the next generation. We use that quite a bit.”

2. Include Your CPA
Angell says your CPA is a more valuable asset in this process than you may think.

“One of the first things I do is if I don’t have the CPA in the first meeting, I make darn sure the CPA is in the second meeting,” he says. “The clients are out there grinding, surviving, and doing what they do best on the farm. The CPA professionals have a much better understanding [of the overall finances] generally, and so we rely on them very heavily in doing the advanced tax planning.”

3. There’s No Such Thing As One Size Fits All Succession Planning
It’s important to remember fair isn’t always equal, especially in situations with on-farm and off-farm children.

“We’ve got to find a way to keep the farm intact and transition it potentially to to the farming child, but at the same time be fair to the remaining heirs,” Angell says. “That farming child may end up with more equity, but they’re going to end up with a bigger challenge of the debt, worrying about drought, making the operation work, taking the risk and taking the lower return. So, when you really step back and look at it, if you’re looking at it economically, some of these children that are getting less value after the estate is fully settled are really better off in the short run.”

4. Set Up Protection From Unintended Beneficiaries
In some situations, a parent will remarry after the other passes away. Angell says it’s important to make sure this doesn’t have an unfortunate outcome for the farm children.

“Most estate plans, especially the larger ones, are going to need some protections built in there for at least a certain portion of those assets being held in an irrevocable trust upon the first death,” he says. “We try to push a pre-nuptual agreement and get the kids involved in for when dad does decide to remarry. Those situations can potentially tear families apart and the farm apart.”

Hear more from Angell on the Top Producer podcast

Four Experts You Need On Your Succession Planning Team

Thu, 01 Aug 2024 15:36:15 GMT

When it comes time to get serious about succession planning, many operations turn to their lawyer to kick off the process. And while that’s a good place to start, Matt Gunderson, vice president of Farmers National Company, wants to make sure your journey doesn’t end there.

“A lot of times when folks think about estate planning, they think, ‘Well, I just need to go see an attorney, right?’ And to some degree, that answer is correct. But what we try to talk about is how to set up a good team,” he says.

Gunderson recently joined an episode of the Top Producer Podcast to share the four professionals he recommends for any succession plan, likening the process to building as sturdy of a stool as you can.

“What’s the best, most sturdy type of stool out there? Well, it’s a four-legged stool,” he says. “Think about that farm or ranch land asset as the seat. Then we start looking at the four legs.”

The Four Legs
1. Attorney
Gunderson stresses the importance of choosing the right lawyer for this process.

“There are different types of attorneys out there. So one, finding an attorney who does estate planning is important. But two, it really comes down to finding an attorney who understands estate planning and agricultural assets,” he says.

Be sure to also consider the state your land is in, and not just where you reside.

“We’ve seen where attorneys in one state drafted something according to that state’s laws, but where the land is at as a completely different example in terms of what that looks like from an estate standpoint,” Gunderson says.

2. CPA
He shares the second leg of the stool should be a CPA. This expert will help you understand the plan’s current tax implications and will also stay up to date on how that could change.

3. Financial Planner
The third leg is a financial planner. Financial planners can help you in some ways a CPA can’t. According to Gunderson, this role looks at future considerations for the plan, such as what it looks like for the upcoming generations.

Just as with attorneys, however, there are different types of financial planners, and it’s important to find one familiar with agriculture and the various accounts you will have.

4. Professional Manager
The fourth leg of Gunderson’s estate planning stool is a professional manager for the property.

“A professional manager can help take care of that land asset for the next generation if they’re not actively engaged in farming or they’re not actively near the property,” he says.

Gunderson adds that after this team is formed and your plan developed, you shouldn’t set it and forget it.

“Don’t throw it on the shelf or put it in a drawer. You better get that team back together every three years to look at that plan because things change, laws change and family dynamics change,” he says. “Was there a birth? Was there a death? Was there a marriage or divorce? Get that team back together to make sure that it’s up to date or it can still come back and bite you in a negative way.”

Catch up on episodes of the Top Producer Podcast

Farm Succession: Don't Neglect The Value Of Planning

Fri, 14 Jun 2024 20:30:00 GMT

The week of June 10, Farm Journal is celebrating the next generation of American agriculture. Our goal is to encourage you to plan for the future and cultivate multigenerational success through the transfer of skills and knowledge. Think tomorrow, act today to align your asset, resource and financial legacy.

Do you want to know the costliest mistake a farmer can make when it comes to safeguarding the future of their operation? It’s neglecting to plan or having an overly simple plan, says Jim Angell, an attorney with Kennedy Berkley.

There are all sorts of reasons farmers are lax about succession planning. Maybe the patriarch doesn’t want to give up control or face mortality. Maybe some of the kids don’t get along or the parents are stymied by the thought they need to treat all their kids equally.

“Farmers have spent 35 years in survival mode, and succession planning has barely registered,” he says. “The past five or six years they have gone from surviving to thriving, but it’s still hard for them to believe a sophisticated plan is necessary.”

That sophistication comes into play when deciding how to treat farm and non-farm siblings.

“Fair and equal are not the same,” Angell says. “The farming child(ren) needs to be provided with some advantages in order for the farm to survive. They need more value to keep the farm going, but there’s a difference between value and cash.”

Angell advises farmers separate the operational (business) side of the farm from the legacy (land). Equipment has to stay with the operational side, for example.

When it comes to the land, if it’s important for each child to own land, divide it up in tracts and don’t put multiple kids on a tract, he adds.

A succession plan often includes several documents, one of which should be a buy-sell agreement , Angell advises. If you are in business with someone, you should know how to exit the arrangement. A buy-sell agreement is a legally binding document between co-owners of a business that spells out how a business should be transferred if a co-owner leaves the business willingly or is terminated.

Legal Vs. Relationship Pieces

Speaking specifically to the next generation, Angell says don’t hesitate to push for communication. In his practice, he usually sees the next generation first to work on their estate plan, and then they bring in the senior generation.

For the senior generation, don’t believe the same philosophy your dad used: You get what you get, and you don’t throw a fit.

“ Please communicate ,” Angell says. ”Currently, my firm is involved in 10 to 15 disputes where land was distributed equally and kids can’t get along or an LLC was set up but there is no way out.”

The good news is there are legal devices to do whatever a farmer wants to do. The key is using the right mechanisms for the relationship pieces.

“Is it worth it to jeopardize your children’s relationship for any reason?” he asks.

Want more insights to plan for the future and be a leader in your field? Sign up to receive Farm Journal newsletters.

5 Conversations Every Family Should Have Before A Farm Transition

Thu, 13 Jun 2024 20:40:11 GMT

The week of June 10, Farm Journal is celebrating the next generation of American agriculture. Our goal is to encourage you to plan for the future and cultivate multigenerational success through the transfer of skills and knowledge. Think tomorrow, act today to align your asset, resource and financial legacy.

Before you handover the keys or step aside for the next generation, make sure you and your family are properly prepared for what comes next. Elaine Froese is a farm family transition expert, speaker and host of the Farm Family Harmony Podcast . She says we’re in the middle of agriculture’s “great wealth transfer” but there’s a serious lack of communication between generations.

“Often there are so many plans to be started that farmers are stymied, overwhelmed and anxious,” Froese says. “I’ve said many times that procrastination and conflict avoidance are killing agriculture.”

For those ready to be proactive in preparing for a farm transition, she recommends these five steps.

1. Calculate Your Income Stream.
Froese says farmers need to determine how they’ll maintain and secure a stream of personal income. Is that coming from their personal wealth or a combination of personal wealth and income from the farm. Once that’s sorted, farmers need to figure out what their living expenses really are apart from the farm.

“They have to figure out their own lifestyle costs first, where they’re going to live and what their lifestyle is going to be,” Froese advises.

2. Define Your Role.
Retiring farmers need to clearly define how they’ll show up for the operation after “retirement” from running the day-to-day. Does that mean fully stepping away, serving as a manager or simply as labor when needed, Froese asks.

“Many farmers who are male have their identity tied up in what they do,” she adds. “They have no capacity or understanding of how their roles are going to shift as they age in place at the farm.”

3. Talk to Your Spouse.
Retirement isn’t a singular decision. Froese says it’s important to discuss the transition to retirement with a spouse or significant other. He or she might have their own ideas of what will or should happen in retirement.

“They need to embrace a vision with their spouse because if the older farmer does not want the same thing as the older farmer’s spouse in regard to what their future role is then that transition plan is essentially stalled and not going anywhere,” Froese adds.

4. Build a Business Plan.
During a transition there will be differing opinions and passionate feelings about the direction of the farm. Froese says that’s expected and farmers need to remember different isn’t wrong, it’s just different. She recommends next-generation farmers bring a business or enterprise plan to the table that explains their intent for future growth.

“When you bring somebody back to the farm you need to generate at least $500,000 in additional gross income to support that new family,” Froese says. “People often do not pay attention to how many families a farm business can support and the level of support expected.”

5. Discuss Future Debt.
As a farmer transitions out of the principal operator role and focuses on retirement, often their risk tolerance for debt decreases. Taking out loans against the farm’s assets for expansion or technology upgrades might feel risky or even irresponsible. Froese says debt loads should be discussed and decided upon early in the transition.

“Many older farmers don’t want anymore debt, and they have it in mind they don’t want to pass debt on to the next generation,” she says. “But where is it written that the younger generations can’t manage the debt?”

Want more insights to plan for the future and be a leader in your field? Sign up to receive Farm Journal newsletters.

A Silent Legacy Will Fail: 3 Ways to Protect Your Assets Now

Mon, 10 Jun 2024 18:49:53 GMT

The week of June 10, Farm Journal is celebrating the next generation of American agriculture. Our goal is to encourage you to plan for the future and cultivate multigenerational success through the transfer of skills and knowledge. Think tomorrow, act today to align your asset, resource and financial legacy.

By Heather Gieseke

After witnessing a beloved and once-thriving family farm fail, I reached out to my colleague Kevin Bearley to make sense of what went wrong. As an estate and succession planning adviser for Pinion, Bearley often sees families make similar transition mistakes. For example:

Dad doesn’t want to deal with the issue of his own mortality. His father left it all to him to figure it out on his own, and it worked out.
The family avoids conversations about whether or when dad wants to retire.
Siblings or children don’t get along well, so parents delay retirement or succession planning because they fear it will increase conflict.
Thinking fair and equal means dividing everything evenly among on- and off-farm heirs.

But silence, or having no plan at all, is far worse than having even a bad plan in place.

Act Before Estate-Tax Exemption Drops
On top of that, there’s a compelling reason to address retirement and inheritance issues now. The estate-tax exemption will expire at the end of 2025, dropping from $13.61 million per person to $5 million (adjusted for inflation). The smaller exemption comes at a time when inflation and land values have ballooned. That’s led to growing anxiety about increased assets and estate-tax rates.

The government can currently tax up to 40% of an estate over $13.61 million. That’s set to change at the end of 2025, unless there’s an extension, and the government will be able to tax up to 40% of an estate over $5 million.
	Current 2024 Law	Proposed Change in 2026
Exemption (individual)	$13.61 million	$5 million*
Exemption (married)	$27.22 million	$10 million*
Estate and Gift Tax Rate	40%	40%

*Adjusted for inflation

“It’s imperative for the senior generation to have a plan because, if not, you’ll end up in a court proceeding,” says Bearley who’s an attorney and a CPA. “Judges don’t understand agriculture. They’ll want you to sell all assets, which could require selling land, and then you’ll have to pay your tax bill and attorney before splitting what’s left — and there’s rarely anything left.”

He recommends three techniques to protect your assets while the $13.61 million exemption is still in place:

Gift your assets. A husband or wife could use one spouse’s exemption to gift land and other assets while keeping the other spouse’s current $13.61 million tax exclusion.
Move your assets to the next generation. Transferring your assets to your heirs takes special expertise, but it can be a smart way to protect your estate from burdensome taxes.
Freeze your assets’ value. With the steady rise in land values, your farm’s worth could double in the next 10 years. If you take steps to freeze its value now, you won’t face a higher property valuation in the future, when tax-exemption rates drop to $5 million per person.

Bearley urges farm families to start today to devise a strategy to achieve your retirement goals or to pass on your estate to the next generation.

You’ll need to work with an attorney, a CPA and a family business consultant — trained advisers who understand farming. It takes time to find the right professionals, set goals, explore your options, map out a specific plan and communicate to all involved. Getting the right result for your family will help avoid strife, keep more of your wealth where you want it and sustain the farm for future generations.

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Meet 87-Year-Old Joan Kerns, A True Trailblazer Who Helped Carve Out A Niche For Her Family Nearly 60 Years Ago

Mon, 26 Feb 2024 22:06:28 GMT

Cut by cut. Slice by slice. Every detail counts for Edgewood Locker , a northeast Iowa-based business that’s been spliced together for nearly 60 years in 1966.

With no master plan, it started when Tom, a farmer, and Joan, a nurse at the time, were forced to find a new place to live.

(Farm Journal)

“We were on his dad’s farm for five years when his dad announced he was going to sell the farm. He wanted us to buy it, but we could not afford to buy a huge farm back then,” Joan explains.

So, they found a farm to rent three miles outside of Edgewood, until an accidental fire on that farm sparked another change.

“Talk about an act of fate. We knew the lady who owned that farm was going to make us move, because she believed those stories that we started the fire,” Joan remembers. “Tom came home one day and said, ‘The locker in town is for sale.’ So, we bought it.”

It was that decision that changed the course for the Kerns family. Neither Joan nor Tom knew anything about running a meat locker, but they had the tenacity to make it work.

“Tom wanted to do the actual meat cutting and that sort of thing, and I was going to do all the books and the book work,” says Joan.

The business started out with minimal equipment: only a saw and a grinder at the locker. That didn’t stop the Kerns from seeing phenomenal growth.

“And every year we were in business, we grew. Every year we got bigger. And so, finally, we outgrew our plant,” she says.

The growth wasn’t always easy, and it didn’t come without financial hardships. Joan says the couple borrowed money to expand and grow six different times.

“But I remember, maybe the second or third time Tom said, ‘I’m going to go up to the bank tomorrow and borrow some money for the next addition,’ and I went up to do our daily banking that day. And the girl said, ‘Oh, we can give you the money.’ So, I borrowed the money, got back home and I told him. I said, ‘Well, I got the money borrowed for our new addition.’ Tom said, ‘They let a woman do that?’ That’s the way it was back then,” says Joan.

A Force of Nature

Joan’s son Terry will be the first to tell you how much his mom was a driving force behind the scenes, if she didn’t always get the credit she deserved.

“She’s kind of a force of nature, there’s no doubt about it, and probably even more so than anybody realizes,” says Terry, who’s one of two second-generation owners of Edgewood Locker.

What makes Joan’s role so essential to their growth is the fact Joan’s husband, Tom, was dyslexic. So behind the scenes, Joan handled the paperwork and books, all while raising four kids at home.

Bringing in the Second Generation Straight Out of High School

Joan is still a true trailblazer today, as the Kerns’ unconventional ways and business decisions also helped fuel the family operation.

“The boys had come into the locker business as they graduated from high school, which really let us dream bigger,” says Joan.

That was in the early 1980s. Tom and Joan didn’t just see their sons Terry and Jim as employees, they allowed the boys to buy into the business fresh out of high school.

(Farm Journal)

“It wasn’t popular with their peers that they allowed Jim and me to buy in at such a young age, you know. They gave us a huge opportunity,” remembers Terry.

“And I think that’s why we grew as we did, because they were partners. They were going to be in this, and it made a big difference,” Joan says.

The growth has been impressive over the past 60 years, including building a new facility in the late 1990s that has seen even more expansion since.

“We built this business because she paid attention to detail. And she wanted to make sure it was done right. She still keeps us on our toes,” says Terry.

At 87-years-old, Joan is sharp, and attention to detail may still be one of her greatest strengths.

“She is not afraid to tell us when she thinks we’ve done something wrong,” says Terry.

Bringing in the Third Generation

While Joan doesn’t overlook the small things, she’s also the first to celebrate how much the family business has grown. It now includes four grandkids who have become part-owners.

“Oh my gosh, I did not see that coming. And they each bring their own experience, knowledge, their forte to the business,” says Joan.

“All of us in the third generation, all I feel have a very unique skill set, which allows all of us to bring something different to the table,” says Baili Maurer, one of Joan’s grandchildren who bought in as a third-generation owner.

“None of us really overlap much. We all have our own thing that we do, and it just works,” adds Katie, who’s also one of four grandchildren who are partners.

(Farm Journal)

Katie and Bailli, along with Luke Kerns and Payson Kerns, are the third-generation owners of Edgewood Locker.

“They’ve got experience, they’ve got education in meat science in business. So, as fun as it was to grow with Mom and Dad adding Jim and me, this next generation really has the potential to do amazing things,” says Terry.

Third-Generation Growth

“We’re just doing what we can to take the business to a new level,” says Baili.

“We really expanded into wholesale stores and retail stores carrying our products. And we just keep going with what the second generation and first generation have been doing, as well,” adds Katie.

The growth is evident everywhere you turn. Construction in their retail and lobby area is a clear sign of even more progress.

“We had a major expansion of 19,000-square-feet that we’ve been in now a little over a year and a half, and I think it’s running well,” says Terry. “We remodeled our old processing facility and updated that, and it looks like brand new.”

The decision to expand and remodel their retail and lobby area was propelled by the busiest season for Edgewood Locker: deer season.

“I think last year, we did 3,700 whole-carcass deer, and then over 3,500 batches of boned-out deer that came in, so well over 7,000 different batches to jerky,” Terry says.

With that type of volume, Edgewood Locker has also been able to invest in bigger and better equipment.

“I’d like to say we had this great master plan, but we never had a real plan to say, ‘Well, next year, we’re going to get into wholesaling, or next year, we’re going to do this.’ We just kind of took it as it came. Something presented itself, we ran with it, and ran hard with a lot of it,” says Terry.

A Legacy Worth Sharing

With 130 full-time, part-time and seasonal employees, Edgewood Locker also offers other custom processing, and has products for sale, in more than 100 retail stores across Iowa. And it’s that side of the business the third generation has already helped expand.

“I hope we can just continue the legacy,” says Baili.

“I’m hopeful that we can just keep doing like we’re doing, keep growing where we can and keep expanding things and have it all set up for the fourth generation if they would like to join in someday,” Katie says.

Walls of awards are a product of what Joan and Tom started in 1966, but that isn’t what Joan is most proud of today. The greatest gift just may be the fourth generation and the chance to carry on a business that started on hopes and dreams.

Succession Planning: Why Now?

Mon, 08 Jan 2024 15:49:28 GMT

If you have a succession plan, Rena Striegel, president of Transition Point Business Advisors, wants to give you a high five.

“I want every farmer to feel confident their succession plan is good,” she says. “But even when a plan is in place, it still needs to be reviewed every year.”

Striegel shares events such as additions of family members, new skill sets that evolve or devolve, and many other realities directly influence any plan in place. But at the same time, external dynamics have highlighted the need for strategy.

She also references such stressors as rising interest rates, uncertainty of labor, higher labor costs, elevated land values and an impending inheritance tax drop in 2025.

“It all adds up to making farmers wonder what we should do,” she says.

At the 2024 Top Producer Summit, a preconference workshop will address all of the above. Attendees will have four takeaways from the one-day session.

Set goals for both the transitioning owners and the operation itself.
Create a plan to ensure your heirs and successors are ready to lead and work effectively together.
Address family disharmony or handle communication with successors who do not tend
to get along.
Choose your professional team and hold them accountable for the work they will be doing for you.

“No matter where you are, we’ve got something for you here,” Striegel says.

The workshop will outline the process and how farmers can step into it as well as manage it along the way.

“It’s important to assess if you’ve done an adequate job so the plan is flexible and can adapt to the changes coming,” she says. “You want a resilient plan so it works the way we want it to work when the time comes.”

Striegel’s workshop will share the tools available to match the goals set by each operation.

“I love the ah-ha moment with a hopeful look that we’ve touched on a topic with a pain point and we are able to provide a solution,” Striegel says. “While the challenges in succession planning continue to evolve, so does our tool set to connect a concept to an actionable item.”

(Farm Journal)

To register for Top Producer Summit, click here .

Settling a Farm Estate: Why It's More Than an Economic Problem

Wed, 06 Dec 2023 02:32:58 GMT

Farmers have struggled with the same business and family problem essentially forever: what happens to the farm when parents die. The conflict between fairness and equality has never been truly resolved except for the wealthy, and not all of them either.

For most farms, the hard facts of long division mean too many heirs dealing with too few hard-to-divide assets. When the bulk of those assets are acres, acres operated by one of the heirs, agreeing on what a successful solution to the division of wealth looks like can elude even seemingly happy and loving families.

Legal and financial experts make comfortable careers from assuring one of the heirs their interpretation of what is just is right. I have spoken before about how for centuries this debate was determined by the law of primogeniture: eldest son takes all. Once women achieved largely equal rights and such laws were repealed, the arguments began, and many families never recovered.

For parents who have struggled successfully to accumulate a viable farm acreage, multiple children present a value judgment weighing the integrity of that land against their affection for those offspring. It’s small wonder being able to blame the law of primogeniture became the default solution. Parents had an ironclad out.

I have throughout my life marveled at what I considered blatantly unfair, inefficient, or illogical estate divisions, until I realized I never really understood the family dynamics and private history that underlay such allocations. Even those instances where great care was made to be as even-handed as possible often ended up with fractured family relationships and precarious farm viability.

It has been discouraging to witness. Estates are almost never just an economic problem to be solved. For the heirs, and even the parents, dividing the wealth serves other purposes, from offsetting the life challenges and needs of each offspring to delivering an emotional message of approval or reprimand. Who gets what will be interpreted by the heirs this way regardless.

If ambiguity in the will invites misinterpretation or sadly, litigation, the quiet truth about these wealth transitions becomes obvious. Settling estates too often ends up about settling scores.

Overcome Family Dysfunction with the 3 C’s

Wed, 08 Nov 2023 20:55:23 GMT

Passing down a family farm from one generation to the next is as old as agriculture itself. It is both a dream and a responsibility. However, the path from one generation to the next is often fraught with challenges, conflicts and family dysfunction. Succession planning in the context of a family farm is more than just a business transition. It’s a journey that involves several critical steps.

Successful succession planning must revolve around consensus, commitment and the consequences of the decisions made.

Step 1: Consensus

Consensus is the cornerstone of any successful succession plan. In the context of a family farm, consensus means achieving a shared vision and understanding among all family members involved in the transition. Here are key considerations:

Have Open and Honest Communication. Family members must openly discuss their aspirations, expectations and concerns. Encouraging dialogue ensures that everyone’s opinions are heard and respected. Though this can be challenging, as family dynamics have potential to lead to misunderstandings and miscommunications, it is a vital first step.
Develop a Shared Vision. The family should work together to create a shared vision for the future of the farm. It should encompass not only the economic goals but also the values, principles and long-term objectives the family wants to preserve and promote.
Define Roles and Responsibilities. Establishing clear roles and responsibilities is essential to avoid conflicts and confusion. Each family member’s contributions and expectations should be outlined with their defined role in the farm’s future. This clarity helps mitigate potential disputes later on.
Seek Professional Guidance. Family farm succession planning requires legal, financial and tax expertise. Engaging professionals, such as lawyers and financial advisers, can help navigate complexities and ensure the succession plan adheres to legal and tax requirements.

Step 2: Commitment

Consensus is essential, but commitment is the driving force behind a successful plan. Family members need to be committed to the agreed-upon plan and dedicated to its execution. Here are critical aspects of commitment in succession planning:

Recognize Individual Goals. While consensus is crucial, it is equally essential to acknowledge the individual goals and aspirations of each family member involved in the farm. Commitment should stem from a genuine desire to see these goals fulfilled.
Set Timelines and Milestones. Establishing a clear schedule of events helps the succession plan progress effectively. Family members should adhere to these timelines, keeping the process on track and avoiding procrastination. It is helpful to identify a succession planning coordinator in the family who is accountable for keeping everyone engaged and on task.
Be Flexible and Adaptable. Commitment doesn’t mean rigidity. Family farms are dynamic, and unexpected circumstances can arise. Family members must be willing to adapt and make adjustments to the plan as conditions change.
Create a Family Code of Conduct. A code of conduct should outline acceptable behavior, conflict resolution mechanisms and ethical standards within the family farm. This helps maintain commitment by fostering a healthy and respectful environment.

Step 3: Consequences

Succession planning is not just about the present; it’s about securing the future of the family farm. As such, family members must consider the consequences of their decisions carefully. The decisions made at this stage will have a profound impact on the future of the farm and the family. Here are some critical considerations:

Financial Implications. The financial consequences of a succession plan are significant. It is essential to understand the financial implications of the plan, including taxes, estate planning and the allocation of assets to prevent financial strain on the farm.
Emotional and Interpersonal. Consequences. Family dynamics and relationships can be heavily affected in this process. Family members should be prepared for potential conflicts, emotional strain and necessary conflict resolution. It’s important to find healthy ways to address the emotional toll these decisions can take.
Legacy Preservation. The decisions made in succession planning will determine the legacy of the family farm. It’s crucial for the farm’s history, values and traditions to be preserved, even as new generations take over. Balancing innovation with tradition is a delicate but necessary aspect of the plan.
Evaluate Sustainability. The successful transition of a family farm is not just about passing down property. It must also ensure the farm’s sustainability for future generations. Decision makers should assess the ability of the next generation of leaders to work well together. This includes not only the ability to make decisions as a team but also the ability to plan for the future while preserving cash flow.

Top Producer Summit Pre-Event Workshop: Take Control Of Your Succession Plan
Date: Monday, February 5, 2024
Time: 8:30 am - 4:30 pm

Family farm succession planning is a complex and emotionally charged process that requires careful consideration of consensus, commitment and consequences. Achieving consensus among family members, committing to the plan and understanding the potential consequences are vital to secure the future of the family farm.

Successful succession planning doesn’t guarantee a smooth or conflict-free transition, but it does provide a structured framework for addressing challenges and disputes as they arise. By implementing strategies such as open and honest communication, clearly defined roles and responsibilities and a shared vision for the future, those involved are able to build a solid foundation for their succession plan. Family members’ commitment to the plan ensures its execution, while flexibility and adaptability allow for adjustments.

Lastly, understanding the plan’s financial, emotional and legacy consequences is essential. With thoughtful consideration, a family can navigate challenges and create a sustainable and prosperous future for their family farm, preserving its traditions and values. Succession planning is more than a business transition; it’s your legacy in the making.

Pick Your Power: Learn How Powers of Appointment Work In Estate Planning

Fri, 21 Jul 2023 18:18:42 GMT

When you draft your estate plan, your plans and wishes should reflect what you want if you died tomorrow. But, of course, after you die, circumstances could change — and your family might wish you’d had a different plan.

While your plan can rule your farm from the grave to a certain extent, it should be flexible, and you can take a few key steps in your estate plan to accomplish this.

In your will or trust documents, you name a power of appointment. This means you grant power to an individual to name recipients of all or a portion of your money and property in the future.

“This power can be wide-ranging or restricted,” says Roger McEowen, agricultural tax expert at Washburn University School of Law. “The two categories are general power of appointment or special power of appointment.”

Here are the differences:

General power of appointment provides the donee/holder broad power to give away the decedent‘s property to anyone, without restrictions.
Special power of appointment gives the donee/holder power to give the decedent’s assets to a select group of individuals or groups.

FOCUS ON FLEXIBILITY

The key difference in the two powers is the level of flexibility, says Polly Dobbs, attorney and owner of Dobbs Legal Group in Peru, Ind.

General power of appointment can have a time and a place in some documents, Dobbs says: “They are really for the Ward and June Cleavers of the world that have only been married to each other; they want to keep things super simple.”

General powers cause the assets subject to appointment to be included in the power holder’s estate for taxes.

Whereas a special power can be broad or narrow, within a person’s comfort level and does not cause inclusion in the power holder’s estate.

“For instance, if your spouse lives for a few more decades and sees who’s on good paths or who’s addicted to meth, the spouse could have a special power of appointment to make adjustments to the ultimate plan,” she says.

BE SPECIFIC

Typically, Dobbs says, a special power is limited to descendants. The power holder can pass your assets to children or grandchildren at different ages or keep them in a continued trust or even pass to a charity. This gives your plan the ability to reflect new law changes or fluctuating asset values.

“If the laws change and it turns out the kids are rich in their own right, where it would be terrible to dump a bunch of acres on their balance sheet, a special power can choose to keep them in the trust for the benefit of the super-rich child without exacerbating their own estate tax problem,” Dobbs says.

If you chose a special power of appointment, McEowen suggests you be specific in the drafting language and choose the donee carefully.

Sara Schafer uses her Missouri farm roots to cover crop management, business trends, farmland and more.

Stamp Out Entitlement: Develop Ownership Criteria For Your Farm

Thu, 20 Jul 2023 20:15:23 GMT

A desire to be part of the farm can quickly slide into an expectation of control. As you look at transitioning leadership and ownership of your farm to the next generation, be ready to tackle entitlement issues.

“If you are experiencing the phenomena of entitlement, you must acknowledge it and develop a plan for how you’re going to deal with it,” says Rena Striegel, president of Transition Point Business Advisors. “The longer you wait, the harder it’s going to be to get rid of it.”

What is entitlement? Essentially, she says, it is either the belief someone has a right to something or it is the belief one is deserving of privileges or special treatment.

Entitlement can actually occur on two different levels:

It can happen on an individual level where a person believes something has been promised.
It can happen when a parent creates an environment where their children are treated differently than other people in the operation.

“In either case, the outcome can be a really big source of disagreement between spouses and families who might have different philosophies,” Striegel says.

THREE STEPS TO TAKE

Your goal is to create a framework and tools for these tough conversations, Striegel says, so no one feels singled out or mistreated. First,
create a family employment policy. Keep it simple, she advises.

Gather your family and agree on how family members will be hired, compensated, managed and rewarded in terms of bonuses or other rewards, she says.

“Be sure to emphasize ownership and employment are two different issues — earning a check as an employee is very different than owning a piece of the farm business,” Striegel says.

Next, create ownership criteria. Detail the types of assets that can be owned and when by family members (see checklist). Be specific with duties and timelines.

“You want to use official language because this is an official document,” Striegel says.

Finally, make sure you have roles and accountability clearly defined for those involved in the farm. This can come in the form of job descriptions, organizational charts or other farm structure documents.

CALL OUT THE SPADES

As you create these documents and framework, Striegel says you will need to lead your team and focus on the end goal.

“Working through these important issues takes leadership and the ability to call a spade a spade,” she says. “If you see a problem, call it out and work through it. That’s how you’ll establish healthy boundaries and expectations with your team and with your family.”

Ownership Assessment: Who, How, When And Why

This checklist from Rena Striegel’s The DIRTT Project can be used as a guide to create ownership criteria for your operation. You can also use the tool to determine where potential owners might need coaching, mentoring or leadership development. Use the following to help create your requirements. Feel free to add.

Does a family member need to be employed full-time in the operation?

Does the family member need to demonstrate leadership?

Does the family member need to demonstrate responsibility displayed in all areas of the operation?

Is a track record of success required?

Does the family member need to be engaged and present or can they just “show up”?

Does the family member have a solid skill set that provides value to the operation in the role they currently play?

Does the family member need to be able to work collaboratively and cooperatively with others?

Does the family member need to understand the finances and show responsibility for them?

Does the family member need to show accountability to other owners and employees?

Does the family member need to support the vision of the operation and take action to make it a reality?

Does the family member need to communicate in an open, honest and respectful way?

Does the family member need to share and display the values of the operation?

Does the family member need to have the ability to be flexible and make changes when necessary?

Does the family member need to be willing to make sacrifices for the greater good?

Does the family member need to demonstrate emotional control and resilience?

Does the family member need to be committed to constant and never-ending improvement?

Read more stories from the 2023 Top Producer Summit:

Preventative Maintenance for Your People: How to Reduce Turnover and Boost Morale

How to Run An Innovation Sprint on Your Farm

Nominate Outstanding Farmers for Awards from Top Producer

Take Time to Celebrate Accomplishments

5 Business Principles That Define Success

Farming Boom or Bust in the Decade Ahead? How to Manage Price Cycles

Be Inspired by Five Remarkable Farm Operations

Ideas Big and Small: Create a Culture of Creativity on Your Farm

4 Things to Do When Your Kids Come Home to Farm

Thu, 20 Jul 2023 18:56:54 GMT

Matt and Lisa Moreland hoped at least one of their sons would return to their farm based near Medford, Okla. What they didn’t anticipate was all three sons – James, Will and David – wanted to join the family business once they completed their college degrees.

“It put me back on my heels. I thought, ‘Wow, we’re going to have to find a way to grow,’” Matt recalls.

That was seven years ago. Here are four things Moreland says he has learned in the process.

1. DON’T SLICE YOUR “PIE” INTO SMALLER PIECES. Instead, make a bigger one. The Morelands have grown their operation to accommodate each son’s return.

With James, they added an Angus cowherd. Will has taken the lead on all things agronomic on the farm, which grows corn, soybeans, winter wheat and cotton. David runs the excavation/construction side of the operation.

Scaling up the faming enterprise as each son returned has enabled the Morelands to compensate them accordingly. “They also get an annual bonus and equity in the operation,” Matt says.

2. LET YOUR LEADERS LEAD. “I quickly learned as we’ve grown there’s only so much I can do. I can guide, but I can’t be a control freak,” Moreland says.

How that plays out: each son leads in their respective areas of expertise, and then he and the farm’s eight employees provide support as needed.

“We meet as a group every Monday morning to look at what needs to be done in the week ahead, make assignments and then modify them as necessary,” he says.

Don’t underestimate the value of having clearly defined roles and accountability when children return to the farm, suggests Rena Striegel, president of Transition Point Business Advisors.

“Create a template to delegate responsibility and build in accountability to develop the next generation of leaders,” she advises.

3. CARVE OUT YOUR ROLE. Moreland functions as the managing partner in the operation, overseeing the cash flow for the farm as well as the big-picture direction for the operation. He also takes the lead on lender, landlord and Farm Service Agency (FSA) relationships.

4. HARNESS HELP FROM EXPERTS TO CREATE PLANS. “The investment of good counsel is minimal compared to the cost of mistakes,” says Kitt Tovar Jensen, staff attorney at the Iowa State University Center for Agricultural Law and Taxation.

Moreland knew, even with professional counsel, mistakes can be made. His solution: “Vet your plans with key individuals and organizations. For financial planning, you have to consider the accounting side of things as well as the legal components, and it can be challenging to understand what might work for the FSA, as well as for your accountant and even the IRS,” he says.

Some key questions Moreland asks of experts: What do you think of our plan? How can we make it better? What else should we do?

Take Control Of Your Succession Plan at the Top Producer Summit!

Date: Monday, January 23, 2023
Time: 8:30 am - 4:30 pm
Cost: $219

Use the topics and tools included in The DIRTT Project to jump-start the succession planning process for your operation whether you are just beginning or need to get on track.

Learn how to set goals for both the transitioning owners and the operation.
Learn how to create a plan to ensure that your heirs and successors are ready to lead and work effectively together.
Learn how to address family disharmony or handle communication with successors who do not get along.
Learn how to choose your professional team and hold them accountable for the work they will be doing for you.
Network with and learn from other farmers in transition.

Learn more and register now!

If you are in the process of succession planning, be sure to check out the tools Farm Journal offers. To learn more, visit FarmJournalLegacyProject.com

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Want to Grow Your Farm? Ask These 10 Questions First

Wed, 17 May 2023 19:57:51 GMT

More than 50% of farmers intend to grow their operation, based on responses in Purdue’s February 2023 Ag Economy Barometer.

(Farm Journal)

If you’re thinking about scaling your farm, Michael Langemeier, Purdue ag economist, says it’s important to first ask these questions.

1. Why should I grow my operation?

Before an operation expands, consider the vision and direction you want your farm to take.

“Are you interested in a commodity-based approach or a differentiated product strategy? Commodities will focus on cost control while products will be centered around value-added production and above-average prices for your crops,” Langemeiers says. “Start here and consider how growth impacts your direction.”

Once an approach is chosen, it’s time to decide which dominoes you want to play in the expansion game.

2. What ways I can grow my farm?

There are many ways to expand an operation: acquire land, new equipment and technology, upgrade facilities, etc. However, Langemeier says some producers need to think outside the box.

“Don’t just think about what you currently do or have always done. This step is a good time to do some soul searching to consider where you want to be in five to 10 years. Do you want to be the same enterprise, or do you want to make changes?”

Langemeier says this soul-searching step is especially important when someone is coming back to the farm.

“We’re seeing that a lot of students who come from farms want to go back, and we have to look into whether there are opportunities there or not,” Langemeier says. “There’s always new interest and ideas that come with the transition back to the farm.”

After establishing how you want to grow, consider your growth approach.

3. What should my growth approach look like?

A strengths, weaknesses, opportunities and threats (SWOT) analysis is a common growth approach in business. Langemeier says another way to think about SWOT is in terms of internal and external analysis.

“Internal analysis means looking at key resources and capabilities of a team or operation,” Langemeier says. “Does someone possess a unique skill you can maximize? Take advantage of those unique skillsets.”

Internal analysis mainly centers around strengths, but weaknesses play a role here, too. Are there areas in your operation that need professional development? Langemeier says this is the time to work on both.

External analysis, on the other hand, examines economic and market trends.

“The easiest example is in livestock; raising pasture pork, poultry or beef, or offering direct meat from a producer rather than a grocery store, are all growing trends,” Langemeier says. “If you have those opportunities, think about how they might fit into your operation.”

While there’s more risk in external factors, Langemeier says “the risk can be worth the reward” for producers who understand what trends they can support.

4. How do I evaluate my farm’s growth ventures?

Now that the growth options are laid out, how does a producer choose which option to pursue?
These eight criteria can help:
• Strategic fit
• Expected returns
• Risk
• Capital required
• Cost and ease of entry and exit
• Value creation
• Managerial requirements
• Portfolio fit

Strategic fit is one of the biggest points to consider, according to Langemeier.

“A few years ago, many growers were interested in hemp production. I would ask them if hemp would require new machinery and if they were used to dealing with contracts,” he says. “If the answer was yes and no, then it probably wasn’t going to be a good fit.”

He says ease of entry and exit is the second criteria he points farmers to.

“If your farm were to pursue a new venture and it fails, would it mean you could lose the whole farm? Because there will be things that fail,” Langemeier says.

If a specific venture requires a lot of capital, he says it is pivotal to explore how the investment could affect balance sheets in the long run.

5. What skills are needed to grow, especially in people returning to the farm?

Taking stock of employees’ skillsets, this is the part where growers consider the strengths and weaknesses of human capital currently on the farm and those soon returning to it.

“When someone’s thinking about coming back to the farm, that’s the time to assess the skills that are currently needed, and then try to encourage the younger person to garner some of those skills,” Langemeier says. “We might have the skills to expand our operation, but do we have the skills to start a new venture in a different enterprise? Think about it from all angles.”

6. How do I finance?

Are you willing to take on debt to expand? If so, how much debt are you willing to take on? Langemeier suggests looking at debt as enabling you to take advantage of an opportunity, not as a negative.

“If you have 2,000 acres and are thinking about adding 1,000 acres, even if that’s leased ground, you’re still going to need more machinery and people. You probably don’t have that retained earnings, so you’re going to take on debt,” he says. “As long as you’re making a profit on those additional acres, and you can make the debt payment, it’s not a problem.”

Langemeier warns that a small profit margin can quickly turn into an issue when a venture flops. He advises producers keep a somewhat equal balance of debt and projected venture profits.

7. What business models do I use to grow?

Expanding internal growth with retained earnings and debt is a typical business model for most operations, according to Langemeier. He says there’s a new trend in this arena.

“I’ve seen a lot of production ag cases recently where a farm acquires assets from a retiring farm,” he says. “Not only do they farm the land, but they also buy the machinery, the bins and the whole farm. This really works for some operations.”

Another model that’s becoming somewhat common is a joint venture. Agribusinesses use this model frequently, but Langemeier says more mid-sized operations are leaning toward this option.

“One of the advantages of joint-venture contract turkey, laying or finishing operations, especially in the Corn Belt, is that there’s a partner with you,” Langemeier says. “It allows us to grow effectively.”

Finding a partner to go-in on the venture isn’t always easy. However, Langemeier says producers often look in the wrong places.

“Some farmers say they don’t have any outside investors, so I tell them to think about family or non-farm heirs. Pitch it as a way of investing in your business so that you don’t have to make them partners or an operating entity,” he says. “Land, for instance, could be an outstanding source of outside equity with non-farm heirs.”

8. How would an expansion impact my current operation?

When considering growth options, it’s vital to your growth success to consider how each option will impact the farm’s balance sheet and income statement. Langemeier suggests running three projected scenarios — worst, most likely and best case — through a spreadsheet or a software, like the University of Minnesota’s FINPACK system .

If you choose to run the projections by hand, this is the process Langemeier suggests:

a. Impacts on cash flow and balance sheet

“A growth change will impact both — don’t just look at cash flow,” he says.

b. Debt versus equity

“Maybe the change will reduce your liquidity and increase your solvency too much,” he says. “If that’s the case, you can’t pursue that particular venture.”

c. Time management

“There are only so many hours in the day, and some of us sometimes work too much,” Langemeier says. “Say you’re going from conventional to organic, it’s going to be management intensive. Be realistic about what you and your team can handle.”

9. What challenges would an expansion create?

Construction delays, cash flow shortages, depleted working capital, short-term inefficiencies and management bottlenecks are often at play when starting a new venture, according to Langemeier. He advises producers to be proactive.

“If a venture creates massive cash flow shortages and eats into your working capital, you need to have a plan to deal with those issues. If you don’t, it will lead you into other challenges, like inefficiencies, and you’ll end up with a failed venture,” he says. “Make sure you have a contingency plan.”

10. What is my sustainable growth rate?

Calculating a sustainable growth rate means saying what a growth rate would be if retained earnings is the only money used, and then compare that to what a growth rate would be if only debt was used. Langemeier says this equation has other variables that often go unchecked.

In the debt scenario, he says you have to think about the downside of debt — the chance of going bankrupt and variability.

“Even if your operating cash flow is low, the lender still wants his payments,” Langmeier says. “You have to think about the coping strategies to make those debt payments even when corn is at $5, compared to $6.50. Make sure you run all the numbers imaginable.”

The Main First Step When Considering Expansion

With all 10 points in mind, Langemeier says the first stage of growth shouldn’t include producers running to formulate a 50-page business plan. He says step one starts with a conversation.

“You should be having regular farm and family meetings, at least once a year, to brainstorm with your employees and family members about the things you could do differently on-farm, and allot time to consider continued improvement, opportunities and threats,” he says.

According to Langemeier, these meetings will offer more than exploring growth; they will ensure farm, family and employee survival.

John Phipps: Is There a Shortage of Young Farmers?

Mon, 27 Feb 2023 21:16:16 GMT

Today, a question that seems to be an abiding worry about young farmers .

“Many of the segments we see on your show that interview people or pan across the audience do not seem to be as ‘youthful looking’ as you would see when looking at cross sections of workers in other industries. I’m afraid that there will come a time when there will be too much land and not enough people to work it? Am I worrying about nothing?”

That’s from David Sick, in Smithville, Mo. The short answer is there is very little to worry about. I have answered this question many times in many forms over the years, but I understand how it can be a recurring concern. I hope these brief facts can help.

Farmers are selected by access to land , period. That means the right parents or very good luck. The next generation of farmers is often unseen since they are not on the farm yet, they are working another job until there is room for them to join.

Farm organizations are traditionally seniority biased, so pictures of farm leaders are like leaders of any other industry – people in at least mid-career. Which adds an additional dimension – the older generation may not be ready or able to step aside, and with self-employed businesses, there is no mandatory company retirement age.

Farmers are like investment managers. If you won the lottery, would you be most likely to trust your wealth to an advisor you went to school with or someone just out of college? Success in renting ground likewise begins with trust, which is a product of shared history. Since farmland is overwhelmingly owned by older, local people, it is natural for them to trust it to people they have known. Any family connection obviously overrides talent as well.

It is mathematically improbable to borrow enough to buy land and rolling capital as well as generate living income. Even with off-farm income it is unlikely. As medical science and better lifestyle choices extend active working lives, opportunities are fewer and competition intense. All this underlines farming is far less about hard physical work than hard assets, so the young muscle and energy advantage has faded.

The bottom line is farming is a great job that many people want to enjoy, but many people also want to be successful lawyers, salespeople, and artists. Desire is not sufficient to ensure such a career. But like farmland, of which I have spoken maybe too often, the supply of aspiring farmers is more than ample for the foreseeable future.

Stepped-Up Basis Leaning in Favor of Rural America on House Ways and Means Panel

Thu, 02 Feb 2023 23:21:15 GMT

Tax policy geared toward farmers and others that transfer land and other assets to heirs will get a renewed focus at the Ways and Means Committee this year, a marker of the panel’s more rural tilt while still promoting measures that favor business.

Chairman Jason Smith (R-Mo.) has cast himself as a champion for working families, small businesses, and farmers, “not the people on K Street.”

With the retirement of former Rep. Kevin Brady (R-Texas), whose district included Houston suburbs, and the exit of former Rep. Tom Rice (R-S.C.), whose district included Myrtle Beach, and the addition of members like Reps. Randy Feenstra (R-Iowa) and Claudia Tenney (R-N.Y.), the panel now has greater rural representation.

Stepped-Up Basis Breakdown

The step-up in basis tax rule reduces the capital gains tax on inherited property. The Joint Committee on Taxation has noted that the failure to collect these taxes costs $40 billion per year, citing a 2021 Congressional Research Service report.

Read more: Use Portability to Avoid a Potential Multi-Million Dollar Estate Mistake

In Democratic proposals to eliminate the provision, lawmakers have included exemptions of up to $1 million and for farmers.

Rep. Bill Pascrell (D-N.J.), who has introduced legislation on the issue, told Bloomberg Tax that “people are getting away with murder” on the issue. There’s room for compromise, though, Pascrell said.

“We’ve made some considerations for farmers, small farmers, but there’s no question in my mind that inheritance has never been taxed many times,” Pascrell said. “Anybody who believes that your inheritance should not be taxed, I’ll listen to, but that, to me, is probably in the top five of what needs to be reformed.”

Favor in the House

With Republicans now in control of the House, Feenstra said he wants to introduce legislation shielding the stepped-up basis and like-kind exchanges.

Read more: Top 10 Stories of 2022: Tax Court Rules Farmer Can Use Old Tractors

The upcoming farm bill will be the first opportunity to add in those types of policies, as well as extending or renewing tax measures from the 2017 tax law that expired at the end of 2022, Feenstra said.

“There’s great opportunity for that Ways and Means can work with the Agriculture Committee,” Feenstra said, “and make sure whether it be in conservation, an energy title, or even a research and development title.”

Tenney said she hopes to make other tax measures benefiting farmers permanent, pointing to the 2017 tax law’s 20% pass-through deduction for certain businesses, which she said benefits farms in her district.

Feenstra also wants to see full bonus depreciation, which allowed companies to immediately expense capital expenditures, and which starts to phase out this year, make a return.

A research and development tax deduction that expired last year could also be included in the farm bill, Feenstra said.

Deb and Jeff Hansen Foundation Stocks Iowa Food Pantries With Pork

Wed, 21 Sep 2022 06:28:03 GMT

The Deb and Jeff Hansen Foundation has wrapped up Haul Out Hunger, with Iowa Select Farms employees delivering 60,000 pounds of fresh, boneless pork loins to 120 rural food pantries.

“The unfortunate reality is that too many Iowans are in need, especially during the summer months. We hope the pork loins and supplies from Henry’s Heroes will bring some,” said Jeff Hansen, President and CEO of Iowa Select Farms and co-founder of the Deb and Jeff Hansen Foundation. “As farmers, we passionately believe in giving back to the communities where our employees and contractors live and work.”

Henry’s Heroes Program brings children’s personal care items to hospitals, food pantries, and women and children’s shelters. The program was inspired by Henry Johnson, Jeff and Deb Hansen’s grandchild and the son of Natalie and Jake Johnson. Natalie had the vision for Henry’s Heroes after she and Jake organized a donation of Henry’s baby shower items to Blank Children’s Hospital.

“We have all witnessed the pain in our world for the lack of even the most basic needs to raise a child, even in our own communities,” said Natalie. “From basics like bottles and diapers to more fun items like books, toys, and the cutest clothes, Henry’s Heroes brings joy to children and their caretakers when they are in most need.”

Debbie Tillman, Food Pantry Coordinator at the Lenox Neighborhood Center, Lenox, Iowa, explained that families in need struggle to secure necessities. “A lot of the essential items infants and children need may not be covered by food stamps or government nutritional programs.”

During “Haul Out Hunger”—June 17-19 and 24-26—Iowa Select Farms employees delivered 1,022 cases of meat and 120 Henry’s Heroes packages. Each meat case contains 12 pork loins, which will provide 240,000, four-ounce servings of nutritious pork for families in need.

Henry’s Heroes items will also be included in the Foundation’s Little Free Pantries that will be established this summer across rural Iowa.

The Proposed Transfer Tax Can be Much Worse for Most Farmers Than the Estate Tax

Wed, 21 Sep 2022 06:27:54 GMT

President Biden’s American Families Plan proposes a new transfer tax on farm and ranch families. Many commentators refer to this as an elimination of the step-up in basis. This is incorrect. Step-up in basis remains, however, families will now face a burdensome transfer tax during lifetime or at death.

Farming and ranching are very capital-intensive with low margins, subject to the whims of weather and markets outside the control of the farmer or rancher. Placing a new transfer tax on simply transitioning the family business to the next generation may result in the family business liquidating due to the tax being greater than the business net worth.

The estate tax is based on the fair market value of a farm or ranch and the tax should never exceed the business net value. The proposed transfer tax will be determined on appreciated assets and may easily exceed the net equity. Here is an example:

John Farmer owns a dairy farm in California with assets of $10 million that have an income tax basis of $1 million. The farm has total debt of $7 million. John’s heirs will inherit the farm with a net worth of $3 million, however, the transfer tax on the $9 million of appreciation based upon President’s Biden’s top capital gains rate of 43.4% plus California’s top rate of 13.3% equals a total transfer tax of about $5.1 million. Instead of inheriting a dairy farm with a net value of $3 million, the heirs now face the prospect of negative net worth of $2 million and owing $5 million of transfer tax. They are in a $3 million hole and either can’t pay the tax or their primary creditor will be the IRS for the next 15 years simply to get it up to zero. With the IRS lien, their banker likely won’t renew the operating line.

The unintended consequence of the proposed transfer tax is the dairy won’t be able to borrow the $7 million in the first place. The bank, fearing an unexpected death of the owner, won’t risk its collateral being yanked away from it at the instant of death.

Some countries have some type of transfer tax (such as Canada), but they do not pair it with an estate tax. A combination of an estate and transfer tax would likely result in the United States having the highest tax on farm and ranch families in the world. In some cases, the actual tax could easily exceed the value of the farm or ranch to the next generation as in our example.

The American Families Plan indicates some protections for family farms and ranches; however, this protection seems to simply defer paying the transfer tax with interest. This “deemed” debt to the IRS will create a lien on the farm and ranch that will create issues with obtaining needed financing to keep the farm and ranch in operation. This so-called protection may simply accelerate the liquidation of the family farm or ranch.

There are other equitable means of raising revenues that will not eliminate American Farm and Ranch families as the proposed transfer tax would accomplish.

The Three C's of Succession Planning

Wed, 21 Sep 2022 06:27:54 GMT

I recently taped a podcast with Dave Specht who is the director of Global Family Business Institute at The Drucker School of Management and perhaps more importantly lives in Basin City, Washington (I will let you look it up on a map).

During the podcast, we discussed what makes a good family farm transition. He mentioned the three C’s:

Contingency planning. Has the family determined what would happen if suddenly you were killed in a car wreck? Would the next generation be ready to immediately step in and take over and perhaps even do a better job?
Cash flow planning. Have you developed a plan that shows how much cash flow you would have in retirement and even more importantly how much cash flow the farm generates? Does the next generation understand how this cash flow is derived and what goes into making it?
Communication planning. Have you communicated your plans to the next generation, including any of those “in-laws?” If you only communicate your plans to your kids, they will then communicate your plans to their spouse. Will it have the same impact? Also, have you introduced your kids to your important contacts, such as input dealers, CPAs, attorneys, insurance agents, etc.

As you can see, these three C’s are very important. A successful family farm transition has likely succeeded in all three. It is difficult to achieve a good farm transition without at least doing well in each of these C’s.

Listen to the podcast:

IDGT - What is it?

Wed, 21 Sep 2022 06:27:54 GMT

Due to possible major changes in gift and estate taxes by year-end, the use of an Intentionally Defective Grantor Trust (IDGT) is becoming more popular for making large gifts in 2021. But what is an IDGT.

It is an irrevocable trust that will remove the contributed assets from your estate but you will continue to be taxed on the income during your lifetime. If your taxable estate exceeds the current lifetime exemption amount, contributing assets to an IDGT reduces your estate and by paying the income taxes on the income of the IDGT a reduction in your estate will occur since the payment of income taxes is not considered a gift.

The trust document must contain at least one grantor tax provision from IRC sections 671-679. By including this provision, we now have an “effective” trust for estate tax purposes and a “defective” trust for income tax purposes. This means the income is taxed to the grantor, not the IDGT.

Let’s look at an example:

Mary creates an IDGT with an $11.7 million gift. Mary has $10 million of other assets not contributed to the IDGT. The IDGT generates $750,000 of income each year and Mary will pay $300,000 of income tax which reduces her estate by that amount each year. When Mary passes away, the IDGT value has increased to $25 million. The $13.3 of appreciation is not subject to estate tax.

However, in order for this to work well, you must have sufficient outside income to cover your retirement needs and any related income taxes that must be paid on income from the IDGT. Remember that the assets you put into an IDGT are no longer yours, but your heirs.

You are allowed at some point in time to turn off the “grantor” status of the trust and have it or its beneficiaries start to pay the tax.

Another option allows you to sell appreciated assets to the IDGT on an installment sale. In return, the grantor will receive an interest-bearing promissory note payable by the trust to the grantor.

Since the IDGT is a grantor trust, no tax is due at the time of sale. Essentially the grantor is treated as if they sold the asset to themselves. The grantor receives an income stream from the installments and part of this income can be used to pay the income taxes on the income from the trust. If the value of the promissory note is equal to the value of the property sold, there is no gift.

Most IDGTs are usually funded with a gift of assets and may also include the installment sale.

This can be a very complicated gift planning tool and you should discuss this with your estate tax advisor if your situation warrants the use of it.