Succession planning for farmers and ranchers is vital, yet it’s not always easy. You’re dealing with land, equipment, and equity — and at the same time, trying to set yourself up for a secure retirement. Figuring out how to pass your business on to the next generation can feel overwhelming. That’s why having a clear plan — and a trusted team of professionals — is so important.
Let’s explore what you need to know about farm succession planning and how to ensure your business remains in capable hands for years to come.
Starting the Farm Transition Planning Process
Every farm family has a different set of circumstances. The first step in creating an effective succession plan is to define your own goals. After all, these are your assets, and you need to protect your own financial future before you think about handing over the reins.
- Establish Your Primary Needs: Consider what’s essential for your retirement. Are there revenue streams that you depend on, like rental income or mineral rights? If you need this income to maintain your lifestyle, you don’t have to give it up as part of your succession plan.
- Identify the Needs of Future Generations: Once you’re comfortable with your own retirement and estate plans, you can incorporate the goals of your heirs. This will help balance your financial needs with their aspirations to carry on the family farm or ranch.
- Leverage Professional Resources: Building a trusted team can make all the difference. Often, this team includes an insurance agent, lawyer, financial planner, and CPA. Additionally, a farmland data platform like AcreValue helps you access accurate property data, land values, soil maps, and comparable sales. This information can guide you in deciding how to split assets or determine which parcels to pass along.
Identify Your Needs
Your goals should account for how you’ll fund your lifestyle after stepping back from full-time farming. Maybe you want to ease into partial retirement by leasing out certain fields. Or perhaps you have cell towers or billboards on your property that bring in monthly income. Keep those if you need them for your own financial security.
These questions can help define your priorities:
- Is it a priority for the business to continue as a working farm or ranch?
- Do you and your heirs share the same vision for the land’s future?
- Does keeping the land in the family name matter to you?
- Are there charitable organizations or community programs you want to support?
By laying out these goals, you create a road map that helps you and your heirs make decisions aligned with your vision.
Who to Include in Your Farm Succession Plan
Next, think through the logistics. Specifically, who should be involved in running or inheriting the farm? This might be a single heir, multiple heirs, or even a farm manager if you don’t have family members ready to take over.
Ask yourself:
- Do you have one primary heir or multiple heirs?
- Are some heirs already involved in farming activities, while others are not?
- Will your heirs be able to work together if they inherit jointly?
Answering these questions will help you figure out if there’s a single successor or if you need a more nuanced approach.
Passing on the Farm or Ranch to a Single Heir
If you only have one heir who is prepared to manage the farm, this can be straightforward. You’ll still want a will and other legal documents to clarify your wishes. And keep in mind that even in the simplest scenarios, conflicts can arise if extended family members believe they deserve a stake. Communicating openly and early can help prevent misunderstandings.
Farm Succession with Multiple Heirs
More heirs can mean more complexity. Open communication is key. One heir’s childhood love of farm work doesn’t guarantee they want to run the place as an adult. Talk openly about everyone’s goals, and consider working with a third-party advisor if multiple family members hope to remain actively involved.
When there’s a mix of heirs who farm and those who do not, you have a few ways to address property distribution:
- Reflect Stakeholders’ Involvement: Keep most farmland intact for the heir(s) actively farming and pass along other assets (like rental properties or mineral rights) to non-farming heirs.
- Structured Purchase: Allow one heir to buy out the others over time. This could mean each sibling inherits equal portions of land, but one person purchases the rest gradually.
- Divide the Land Equally: Splitting land among multiple heirs can work if everyone agrees. However, this can also fracture the farm’s potential. A 200-acre farm that’s run efficiently may lose value if divided into several smaller parcels. Decide whether the land’s long-term viability is best served intact.
Farm Succession Planning When There’s No Successor
Not every family has an heir interested in agriculture. If yours still wants to keep ownership, you might hire a manager or partner with a young farmer program. You’ll need to gauge whether the business can support a paid manager while also providing you with retirement income.
You can start looking for a successor by:
- Networking with other farmers and ranchers
- Connecting with local farm training programs
- Offering internships or limited manager positions to test compatibility
Asset-Based Considerations During Farm Succession Planning
Your plan will depend, in part, on the assets you own. Each type of asset (machinery, livestock, feed, or land) comes with specific legal and tax considerations.
Machinery
Machinery can be sold, gifted, or transferred. Each option has tax implications, so talk with your tax advisor. Even leasing your equipment to your successor can work, as long as you decide who’s responsible for repairs and maintenance.
Feed and Livestock
Livestock can be sold outright, transferred through installment sales, or handled via a share arrangement. For example, if you retain ownership of a breeding herd, you and your successor could split ownership of offspring until they’re ready for market. Each approach has its own financial and tax complexities.
Land
Land is often the largest asset in a farm operation. You can transfer it during your lifetime through a sale, a gift, or upon your death. Each method has different tax ramifications:
- Lifetime Sale: You can opt for a cash sale or an installment sale.
- Gifting: You can gift up to $15,000 of property yearly per recipient without incurring gift tax.
- Inheritance: Transferring land upon death is common because it allows you to keep earning income (e.g., rent) during your retirement.
Transition Your Farm or Ranch Gradually
After you’ve made decisions about ownership and management, start shifting responsibilities slowly. For example, if your heir is comfortable handling livestock, put them fully in charge of that enterprise first. Then add responsibilities over time. This gradual transition helps them gain experience and increases the likelihood of long-term success.
How AcreValue Can Support Your Succession Plan
At AcreValue, we specialize in farmland data and analytics that can help you and your heirs make informed decisions:
- Land Valuation: Get estimates and comparable sales data to understand the fair market value of your property.
- Parcel Insights: Review soil composition, crop history, and productivity to strategize which parcels may be best for active farming or rental agreements.
- Boundary Mapping: Visual tools that help you visualize your property boundaries, subdivisions, and any potential divisions.
- Market Trends: Stay updated on regional farmland trends so you can decide when and how to execute key parts of your plan.
Conclusion
Farm succession planning is about preserving the legacy you’ve built and ensuring that your land remains productive and profitable for the next generation. By starting early, clarifying your own retirement needs, and openly communicating with your heirs, you create a strong foundation for the future of your farm or ranch.