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Agricultural News


Having a Transition Plan in Place for Your Operation Early is Critical, says OSU's Shannon Ferrell

Wed, 27 Jul 2022 12:29:52 CDT

Having a Transition Plan in Place for Your Operation Early is Critical, says OSU's Shannon Ferrell Associate Farm Editor, Reagan Calk, met up with OSU’s Dr. Shannon Ferrell at the Oklahoma Cattlemen’s Convention last week and talked about why it is important to have a transition plan in place for your farm or ranch.

“If we talk to farmers and ranchers, almost invariably, what they are going to tell us is what is most important to them is they want to keep their family together and they want to keep their family farming,” Ferrell said. “Ideally, they probably want to keep their farm together as well.”

If you don’t have a plan, Ferrell said there are too many forces working together to pull things apart.

“I think, really, if your objective is to keep that farm operation together, and hopefully keep your family together as well, you have really got to be proactive about that because there are just too many ways for that to go wrong if you don’t.,” Ferrell said.

Ferrell said that getting families to talk about implementing a transition plan while everyone is still healthy and happy is one of the biggest challenges.

“One of the biggest challenges is to help people understand that if you are proactive and have that conversation while everyone is mentally well and they are physically well, versus when somebody is in an emergency room or a hospital or something like that,” Ferrell said.

If those involved are in the state to make better decisions, Ferrell said it gives everyone more time to work out the tools needed to transition and to implement those tools.

“If we are really trying to talk about moving a farm operation from one generation to the next, to make that financially viable we might be looking at a 20-25 year or 30-year horizon, and so the time starts now,” Ferrell said. “Versus most people looking at this as an estate issue and saying ‘well, people can just have it when I die,’ but there are lots of things that can go wrong with that approach, so the sooner you start, the better.”

In many cases, producers try to do the fair thing by splitting their assets right down the middle. Ferrell said this method does not always work.

“Equal isn’t equitable,” Ferrell said. “Equal is treating everybody the same, but equitable means treating everybody fairly.”

Ferrell talked about how in many cases, one sibling wants to keep the operation going and the other wants to sell out. This scenario, he said, leaves the sibling who wants to stay on the ranch or farm no other option but to buy their sibling out which is incredibly difficult.

“There are two key issues when we are talking about splitting stuff down the middle,” Ferrell said. “One of those is that it is just financially not viable for most farms and ranches. The farm simply cannot afford for a farm kid to buy out a city kid just based on the cash flow of the farm or ranch.”

Another component, Ferrell said is that if we have someone who has come back and really made meaningful contributions to the farm, it may not be fair to treat them exactly the same as somebody who might love their parents, but hasn’t made contributions to the operation.

Dr. Ferrell also talked about the steps to a successful transition.

“I think the most important thing you can do is just start,” Ferrell said. “Just do one thing and if you need help getting that started, it is simply just rounding up what you’ve got. Do a really good deep dive inventory on all of your assets, but also do a deep dive on your people.”

Ferrel said this means analyzing who is involved with your operation, who has an economic connection to it, and who has an emotional connection to it as well. As part of doing that, Ferrell said you are already starting to generate ideas about how those pieces might move over time.

“We always want to help folks out with Oklahoma extension service, so reach out to your extension educator or tell them that you’ve got some interest in some transition planning,” Ferrell said. “ They can connect you with some of our state specialists that can come out and meet with your family and see what pieces are involved, see what dynamics are involved, and hopefully we get you a few steps forward in the process so when you go talk to your attorney or your accountant, you’ve already accumulated some of the things that you need and we hopefully save you some money and some time in that process.”


Click the LISTEN BAR below to hear more from Shannon Ferrell on implementing a generational transition plan for your operation.


   

   

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