As the age of farm operators increases, transferring the ownership and management of the family business to the next generation will become one of the most important issues farm families will face.
While many farmers dream of seeing their legacy passed on to the next generation, many postpone initiating a plan for the transition of their business for a variety of reasons. Many claim that there is not enough time to discuss these matters. Or if planning does occur, it simply involves the senior generation drafting a will describing how the farm assets should be divided among heirs.
In order to help farms plan for their future, the Ohio Ag Manager Team in 2006 began to develop educational materials, workshops and resources for families as they plan for the transfer of their farm business to the next generation.
There are six major questions that family businesses should ask themselves as they plan for the future. These are:
- “Do I want to pass my farm operation to my heirs as an ongoing business or do I want to pass it on as a group of assets?”
- How can you tell if the business is profitable enough to provide for the next generation?
- Are there enough income and assets to provide for the older generation’s wants and needs?
- How can you help the two generations get along?
- What should you transfer and in what order?
- How can you avoid paying too much income, gift and estate taxes?
It is critical the discussions about the future should take place sooner than later as there are a myriad of decisions which need to be made. If a farm family desires for the next generation to return to the farm, plans need to be made to make sure the younger generation makes a fair wage. Plans should also be made to allow the older generation to slow down and eventually retire.
The OSU Extension transition team is pleased to announce the newly revised Bulletin 862 titled, “Transferring Your Farm Business to the Next Generation” is now available as a resource for families to use as they plan for the future. This 89 page bulletin helps families answer the six major questions when transition planning. This bulletin is one which each generation should read.
This bulletin can be purchased at your local county Extension office for a bargain price of $9.25.
Our team also has developed eleven short fact sheets that accompany Bulletin 862. These “Building for the Successful Transition of Your Agricultural Business” fact sheets can be accessed at: http://ohioline.osu.edu/bst-fact/index.html or can be received by calling your local OSU Extension office. Some of the topics discussed in this series include: business entities available to Ohio farmers, conducting SWOT analysis, developing the next generation of managers, whole farm planning model, tax characteristics of business entities, and planning for the successful transition of your agricultural business.
Transferring a family farm or farm business to the next generation can be a challenging task. Legal issues, tax laws, and personal differences between family members are some of the issues families must confront when deciding how to transfer the managerial and asset control of a family business. Working together, families can answer the tough questions and develop a transition plan that will provide the opportunity for the farm to be successful for many generations. Let’s prove that Ohio farms are great places for our younger generation.