Kentucky Ag News

Start planning now for transition and continuation of the family farm

University of Kentucky College of Agriculture

In the past two years College of Ag faculty have been involved in four farm business transition workshops that have been attended by more than 600 participants ranging in age from their 20s through their 80s. With estimates that up to 70 percent of farm land will change hands by 2025, the average age of Kentucky farm operators being 57, and uncertainty around federal inheritance tax policy, the need and demand for farm transition planning is strong.


While the threat of inheritance taxes or the uncertainty of potential changes in tax law are often the driving force for developing a transition plan, it is family disputes, rather than tax obligations, that are more likely to threaten the future of the farm business. A recent informal poll of farm management professionals with several hundred years of collective experience failed to discover a single farm business whose failure could be attributed to tax obligations. In contrast, each of the professionals knew of several cases of farms broken up because of unresolved family conflicts.

Disputes over the distribution of assets among siblings can be averted by the development and execution of a will, but the business is more than just a collection of assets. Successful transition and continuation of the business should also include provisions to transfer management, labor, and marketing responsibilities in a fair and orderly fashion. The transition should also accommodate the financial needs of all the families who depend on the sustained profitability of the farm both the entering and the exiting generations. The will is an important part of the transition, but is just a part of the total plan.

Few families can develop the plan without the assistance of professionals. Attorneys, accountants, lenders, financial planners, and farm management advisors are all resources that can, and should, be consulted in development of a transition plan. And clearly, all family members should be engaged in the transition process. We used to suggest that these conversations should take place around the kitchen table. That was probably never a very good idea, and heres why. It is NOT NEUTRAL territory. Much of the family history and a lot of the family emotion are gathered around that table.

We would suggest moving the conversation to a neutral site a bank boardroom, an Extension office somewhere off the farm, away from distractions, including cell phones. Wed also suggest in some cases that the business should hire a facilitator to help assemble the team, set an agenda, direct the meeting, take notes, and help produce the plan. The facilitator may be the one to raise the difficult questions and seek compromise solutions. One farm financial management advisor has observed that if you havent fired your facilitator about three times, theyre not doing their job.

According to the 2007 Ag Census, there are more than $44 billion dollars of agricultural assets in Kentucky. If 70 percent of those assets change hands by 2025, thats a $5 million-a-day opportunity or problem if the transition is not planned in advance of the deaths of the owners.

This article was written by Steve Isaacs, Extension professor for agricultural economics in the University of Kentucky College of Agriculture. The article first appeared in the Nov. 30 edition of Economic and Policy Update.