Succession planning may appear to be a difficult topic at first, but only a very small percentage of farm owners and operators haven’t begun talking about transition.
Only 10 per cent of current owners and 11 per cent of prospective owners have not had any discussions about succession planning with anyone, according to the Ag Succession Survey. Aside from this small percentage, a majority of farming families are having these discussions.
When it comes to what’s being discussed, three topics stand out in all discussions, all relating to finances and tax planning. The top three topics discussed with possible successors or the farm’s current owners are: tax planning for ownership transfer, financial implications of ownership transfer, and the finances of the farm.
Interestingly, when comparing the discussions had by current owners and by possible successors, one point stood out: current farm owners are less likely to have discussed succession topics with possible successors, whereas potential next-generation owners with an interest in taking over the farm were more likely to engage in a succession discussion with the owner. Twenty-four per cent of current owners have not discussed any succession topics with possible successors, whereas only 14 per cent of non-owners haven’t discussed succession with current owners. The data reflects well on prospective owners who are taking initiative in succession planning and starting conversations from the bottom-up, instead of waiting for the current owner to initiate conversations.
The lack of discussion could be due to barriers faced when it comes to talking about succession planning. For current owners, some of the top barriers hampering discussions included the lack of a succession plan (26 per cent), the possible successor is not ready to begin the process (19 per cent), family dynamics, such as a sibling conflict or divorce (16 per cent), and possible successors not being interested in taking over (11 per cent). A small percentage of owners (five per cent) state the operation not being profitable is a barrier to succession planning. If finances and tax planning dominate transition discussions, an unprofitable operation will result in a reluctance to have these transition conversations.
For prospective owners, some of the top barriers hampering discussions included there being no succession plan in place (30 per cent), complicated family dynamics (30 per cent), current owners being unwilling to discuss retirement or transition (21 per cent) and multiple successors being interested in ownership (10 per cent). A small percentage of prospective owners (eight per cent), noted the current owner(s) does not think they are ready to take over as a barrier to succession planning.
Every situation is different, and a large percentage of current owners (37 per cent) and prospective owners (44 per cent) indicated they haven’t encountered any of the barriers listed in the survey. For those that have, there are resources to help navigate family dynamics in farm transition planning and tips for young farmers for getting starting on transition planning.
