On a recent trip to Minnesota, I visited several farms that were in the process of bringing the next generation into the family business or contemplating starting the process. The farms varied greatly in cow numbers (100 to 1,500 cows), philosophy, and facilities, but they all shared one common goal. They wanted to leave the next generation, family members or not, with a dairy farm that would provide for the future. Perhaps that meant building a new barn, updating the milking system, or simply taking time to evaluate what improvements might be needed in future years.
I gathered two things from listening to these dairy producers. First, I became extremely encouraged in the future of the dairy industry. Not only were younger generations interested in continuing to farm, some had branched off and began new farms. Others had expanded or even specialized to increase income for another family. It was exciting to see so much interest and innovation in the younger generations. Second, many farms had employed an off-farm advisor for the transition process to insure the process was done right. This advisor not only offered tax and legal advice on the transition, but provided an outside perspective on the situation which helped make the process as smooth as possible.
- Communication is important for all parties involved. If there is no communication, nobody will be happy with the outcome.
- Having a steady cash flow allows the farm to survive as a business and the families that depend on the farm to make a living. Without this income, the transfer will fall apart.
- Keeping accurate records and having an open book during the process is also important. If not everyone involved is aware of the farm's finances, the transfer will be extremely difficult.
- Without clarity, farm transfers can be trying. Lay out things in black and white so all parties are informed
- Seek outside advice and ask questions. There are many advisors and experts in the field who are aware of the tax and legal nuisances. Don't be afraid to seek them out.
