PENFIELD, Ill. — Developing a farm succession plan is vital because land is not just ground — it’s the legacy farmers are passing to their children.
“You built it so you have to figure out what you want to leave. The legacy piece is really critical,” said Cheryl Mitchell, who facilitated a farm succession discussion held at the Historic Farm Days event in Penfield.
Mitchell, who grew up on a dairy farm in central Illinois, put together a panel including an accountant, attorney, banker and insurance agent to provide a place for farm families to start the conversation about developing a succession plan for their operations.
“This doesn’t get solved overnight because they’re very difficult conversations to have and they’re emotional,” she said. “My dad’s side of the family didn’t have a plan and as a result I have aunts and uncles that do not speak to one another anymore.”
About 70% of farm families, Mitchell said, do not have a farm succession plan in place.
“If you don’t have a plan to protect what you have, it’s going to get destroyed,” she said.
Kyle Emkes lost both of his grandparents on his mom’s side of the family before he graduated from law school.
“They had worked with an attorney and thought they had everything in place, but it was not even close,” he said. “I lived how bad a succession plan can be.”
As a result, Emkes learned lessons that he does not want anybody to repeat.
“There are families and there are farm families and the fabric is entirely different,” he said. “There are answers — you don’t have to divide the farm and it does not have to end in a fight.”
Russ Leigh is an accountant and is involved with his family farm together with his son.
“I’ve seen numerous people in our offices fight over estates,” he said. “I’ve had to separate people and take them out of the room — it’s not fun to watch a farm family get torn apart.”
Farmers need more than a will.
“It’s a start, but it’s not an estate plan,” the accountant said. “Kids need to know what they’re getting so bring people you’re going to give things to into the conversation.”
Planning for transferring the farm operation should not be secretive, Leigh said.
“Don’t be afraid to tell people,” he said. “It needs to be out in front so everybody’s clear what the picture is and they’re going to find out anyway.”
Nick Reutter has been involved with finance and banking for 20 years, where he specializes in agriculture and commercial lending.
“I’ve had a front-row seat to see how estate plans go both good and bad,” he said. “The process is not going to be easy or fun and it might not be cheap, but you need to have the conversations.”
Reutter has seen a lot of farmers hesitant to document their assets and liabilities properly so they can show that to the next generation.
“Kids are taking over their father’s farm and dad has never shown them the books,” he said. “Go through your balance sheet with your heir.”
Some of the reluctance to develop a plan comes from farmers’ humility.
“Farmers want to earn an honest living and provide a legacy of an earning potential for future generations,” said Emkes, the attorney. “But they are so overwhelmed by the generosity God has blessed their family that they don’t want to brag about what they have.”
Emkes encourages farm families to avoid making assumptions when developing succession plans.
“I’m a walking, talking example — if you looked at me not knowing I’m a farm kid, you might say I’m not interested in the farm,” he said. “I’m deeply interested in the farm.”
Sons, daughters, grandsons or granddaughters may have taken jobs outside of the family farm, but they have a huge desire to be involved with the operation.
“Owning acres is pretty handy because you don’t have to be involved in the cultivation of crops to still be involved in the family farm and be proud to own some of the most unique thing you can own which is the dirt that can feed families,” Emkes said.
“I don’t enjoy having a conversation about my grandpa not being here because we are too tight,” he said. “The younger generation does not like hearing about the fact the older generation won’t be there, but it’s a conversation you need to have.”
The Insurance Agent
Chad Hesterberg’s family farm is about three miles from Penfield. The insurance agent explained the importance of communication with all generations.
“The first generation fought for the farm and the second generation understands the sacrifice of the first generation and they’re willing to make some of the sacrifices,” he said. “The third generation didn’t sacrifice.”
Hesterberg is partly in the second generation and at the same time he’s the third generation.
“I respect the farm so much because I picked up rocks and I saw some of my dad’s sacrifices,” he said.
“Now the challenge is to pass that onto my kids and explain and teach them about how we got the acres that we own. That only happens through communication.”
“The first generation is the owners, the second generation is the protectors — they want to protect what they set up,” added Mitchell, the discussion facilitator. “The third generation is the inheritors who didn’t really sacrifice so they don’t know you baled straw and lifted every bale by hand.”
“These are different mindsets and those mindsets are what get in the way of planning for the future,” she said.