Estate planning: Financial professional shares steps to develop a transition plan

Nationwide Land As Your Legacy program Central Regional Vice President Lisa Quist spoke about developing a transition plan for farmers and ranchers transitioning their estate and assets to the next generation during the Wyoming Women in Ag Symposium on Nov. 18 in Riverton.

Generation one (G1) is the current major owner/operator of the assets, generation two (G2) is the next generation which will be taking over the assets and generation three (G3) follows G2. The Nationwide Land As Your Legacy program was put together to help farmers and ranchers transition their farms and ranches from G1 to G2. 

Quist mentioned the importance of a smooth transition from G1 to G2.

“There is a lot at stake for those generations coming behind G1,” she said. “G2 has most likely put a lot of time into the operation. This is what they are planning to do for their whole career, and if the transition doesn’t go smoothly, it stands to take away a lot from G2 and following generations.”

Quist noted many farmers and ranchers will be going through this transition process within the next 20 years.

“The U.S. Department of Agriculture states over the next 20 years, 70 percent of all U.S. farmland will transfer to the next generation, so this is a huge transfer of assets,” she said. “Because the age of the average G1 is getting older, this window is actually shrinking every single year to get this work done properly.”

Quist mentioned important factors to keep in mind while developing and implementing a transition plan include open communication, developing a mission statement and maintaining family harmony.

Communication

Quist said the most important factor in developing and implementing a transition plan is communication. 

“Relationships are the biggest challenge in getting this process to be successful,” she said. 

Quist acknowledged the conversations around transitioning assets are challenging to have, but what happens when families do not have tough conversations is much worse. She said it is normal to have conflicting objectives on the farm or ranch because everybody has an individual story and individual goals.

“It is crucial for an operation to identify those challenges so producers are not making decisions for their operation based on assumptions,” she said. “When producers are making those decisions based on assumptions, it is detrimental to their operation; and honest communication is the most important place for them to start.” 

How well the operation communicates directly correlates with how successful the transition will be, said Quist.

“The most successful farmers and ranchers we work with on transition planning are the ones who are excellent at communication,” she said.

She mentioned communication isn’t going to solve every problem or take away differences in opinions, but it will define issues, validate assumptions and minimize misunderstandings.

“Good communication is the foundation of a successful transition plan,” Quist said.

Creating a plan

Quist said the first step in developing a transition plan is to create a mission statement.

“The mission statement shares the basic purpose of the operation – it explains why the farm or ranch exists,” she said.

It may feel awkward to treat a farm or ranch operation like a traditional mainstream business, but Quist said the most successful operations are willing to do this work. When developing the transition plan, she encouraged the “key players” in the operation to be involved with the process.

Make the mission statement short, easy to understand and display the mission statement where people will see it every day once it’s complete, she said. 

“Producers use the mission statement to guide their decisions to help them move in the same direction and start thinking and working together,” she said. “The mission statement helps producers make tough decisions.”

Structuring meetings

Quist said families should conduct family meetings to ensure everyone’s voice is being heard.

“These meetings may be awkward, challenging and uncomfortable when first started, but it is really important,” she said. “Producers need to have the opportunity and the space to be able to have these conversations.”

In order for these meetings to be worth everyone’s time, they need to be well structured with an agenda sent out at least two days before the meeting, Quist said. The meetings must be a safe space for everyone attending.

“There’s no room at the meeting to feel ridiculed, mocked, not listened to or disrespected,” she said.

Quist recommended structuring the meetings with set roles including a person in charge of the agenda; someone taking notes; someone tracking the time; etc.

“I encourage producers to break out of the family mindset and move into the business mindset,” she said. “Have these roles and then every time you meet, switch roles.”

Quist noted keeping the meetings consistent is key.

“These meetings need to be safe, well-structured and follow a schedule,” she said. “Find what works for the family, set the schedule and stick to it. Make family meetings an important part of the operation’s structure.”

Maintaining
family harmony

Quist mentioned throughout the transition process, family harmony can be challenging to maintain, but it is crucial. She said a major rule of hers is to avoid gossiping.

“This is a hard one,” she said. “It takes a lot of bravery to be the one to stand up and say our family is not going to do this anymore. It’s a huge shift for a lot of families in the way they operate, but it is important.”

Families need to feel safe while openly discussing differences, concerns and issues, Quist said.

“Have those conversations,” she said. “Have the safe space where you can talk about it and have the opportunity to speak up.”

She also recognized the importance in avoiding grudges, which she said applies more to G2 and G3.

“G1 is still the primary owner of the assets, ultimately it is their decision what happens with the assets,” Quist said. “The decision won’t always be what everyone is hoping for.”

Family members involved need to be willing to let go of grudges and not carry them into the future, she said. 

“At the end of the day, you’re still family, you still love each other and you still want to operate as a family in spite of tension,” said Quist. “At the end of the day, you still want to be able to spend time with your family and have a good relationship with each other, so you need to find out how to separate the family from the business to be successful.”

Kaitlyn Root is an editor for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.