One of the most common questions asked of our farm management team is, “How do I transition my farm to the next generation?” Often, this question comes after a major life event, such as a serious illness or the unexpected loss of a family member, that brings the future of the farm into sharp focus.
In answering this question, it is easy to jump straight into legal documents and financial decisions. However, before focusing on wills, trusts, probate or asset division, it is important to step back and consider the bigger picture and to get organized.
What legacy do you desire?
We recommend that reflection be the first step. Start by reflecting on your family’s history and your vision for its future. Should the farm continue as a business for the next generation? Will it be sold at retirement? Or will heirs own the land and operate it as landlords?
There is no single “right” answer. What matters most is that you take time to think through your goals and include all family members in the conversation. Each person may have different hopes for the farm’s future. The key question to ask is: What legacy do you want to leave? Taking time at the beginning of the process will help guide every decision that follows. Skipping this step often leads to confusion or conflict later.
Who should inherit the farm?
A key part of planning is deciding who will receive your farm and other assets. While most people immediately think of their children, heirs can also include parents, extended family, neighbors, friends or even organizations like a church, foundation or university. Instead of focusing only on “who is next in line,” consider who will be the best steward of each asset entrusted to you during your lifetime. Keeping this perspective can make difficult decisions clearer and more intentional.
What do you own and owe?
Once you have identified your heirs, the next step is to list what you will pass on. During this process, you will develop an estate balance sheet that combines your business and personal assets and liabilities. This balance sheet becomes a foundational piece as you move forward with estate planning.
Farm assets may include land, machinery, equipment, livestock, stored grain and farm financial accounts. Personal assets might include savings, retirement accounts, vehicles, homes and other belongings. Be sure to include any ownership interest in business entities such as LLCs or corporations. You should also account for items such as life insurance policies and mineral rights. On the liability side, include items such as operating loans, land mortgages, machinery debt, credit cards, personal loans and debts owed to others.
Getting organized
To help with this process, Ohio State University Extension has developed the Farm Asset and Resource Management Spreadsheet. This Excel-based tool helps organize assets and liabilities while also capturing important planning details such as executor information, advisors, and funeral instructions.
FARMS also allows you to test different scenarios so you can evaluate how various decisions may affect your plan. You can access the free spreadsheet at: go.osu.edu/FARMS
In addition, we recommend creating a binder or digital equivalent to store key documents. This should include deeds, titles, account records, insurance policies and business agreements. Having these materials in one place allows your advisors to quickly review ownership, titling and any transfer-on-death or payable-on-death designations.
You may also want to include tax records, lease agreements, depreciation schedules and an inventory list of stored crops or commodities. Finally, make sure copies of any existing legal documents, such as power of attorney, advance directives, will and trusts are included.
Upcoming workshop
To help families get their start, OSU Extension will be hosting a free Zoom workshop titled “Is Your Farm and Family Ready for Your Death” on July 27 from 7-8:30 p.m. During this session, we will review the steps discussed in this column and give you strategies on how to get started. You can pre-register for this webinar at: go.osu.edu/prepforfuture
Take the first step
Thinking about our death and its impact on our family and farm operation is not easy. However, taking time now to reflect, organize, and communicate your wishes is one of the greatest gifts you can give to those who follow you. If you have been putting off this process, I encourage you to take that first step today. Start the conversation, write down your goals, and begin shaping your farm’s future. And remember, OSU Extension is here to help!
