The Importance of Farm Transition Planning

The Importance of Farm Transition Planning

July 4, 2016

Shannon Ferrell is an associate professor of Agriculture Law at Oklahoma State University who specializes in farm transition planning. He knows from personal experience that everyone on a farm, young and old, should have a plan.

Shannon Ferrell's brother, Adam, planned to run the family farm until tragedy struck. Ferrell said, “My mom sent me a message saying please call me back, and as soon as I could I called her back. It turns out my brother had been killed in a farm accident that afternoon. So that took a little bit of processing to work through."

The family was caught without a plan and had to figure out how to go forward while mourning their son and brother. 

"Lots of folks think that transitioning planning is only something you engage in if you’re an older operator in your 60s or 70s. And that’s certainly true, but it’s every bit as important, if not more so, in young producers," explains Ferrell. 

Young producers are often burdened by high debt-to-asset ratios and are more likely to have young, dependent children. "So, if something happens to you the effect can be absolutely devastating on the folks that you leave behind. When we lose an older producer it’s certainly a tragedy as well, but the operation will better withstand that than losing a young operator." 

A will and life insurance policy that covers on- and off-farm debts are simple tools that make a big difference. For older producers, one of the biggest mistakes is having no plan at all. 

Ferrell knows what happens when an unexpected loss forces a family to make hard choices, but he also understands why succession planning is hard for families to do. "I think farmers and ranchers are sometimes reluctant to talk about transition in planning because it’s tough. No one wants to contemplate their own mortality. We are successful farmers and ranchers because we’re tough, independent, and sometimes we like to have control of the operation. We’re afraid that having a conversation on succession planning means we’re giving up control of something that we worked a lifetime to accumulate." 

You can read more about transition planning HERE.

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