Make ranch succession decisions more than dreams
Transferring ownership of the family ranching operation to the next generation can be emotionally stressful and result in conflict among the family members involved.
“Most families have an estate plan or family will, but very few actually have a ranch business succession plan,” according to Ron Hanson, who is a Harlan Agribusiness professor emeritus with the University of Nebraska-Lincoln. “A successful succession plan spells out the process for the ranch to remain in the family if something unexpected happened to the ranch or a ranch family member. Very simply put, if something unexpectedly happened today, does everyone in the family clearly understand what would happen tomorrow?”
“Planning for ownership succession is vital to keeping the ranch in the family for the next ranching generation, and that a family ranching legacy continues into the future. How do we make sure the family name on the ranch mail box never changes?” he asked.
“The hardest thing, as a parent, is being fair to all your children,” Hanson said. If the parents help one of their children get started in the business, then in the final estate all of the children should receive an equal share because the child who stayed has already received a reward, he said.
“If not, that child made a sacrifice the other children didn’t, and should be rewarded for that sweat equity,” he said. “I hate promises and sweat equity, because the children who stay on the farm are seldom rewarded for it. I would encourage you, as parents, to help your child build assets so they can successfully take over. Remember, what they someday inherit is what they had a hand in helping you build.”
BUILDING THE PLAN
For more than 30 years, Lewellen, Neb., rancher Lynn Myers wondered who would take over the ranch that had been in his family for more than 100 years. His two children both had professional degrees and jobs that paid well. He didn’t think either would give that up to return home. Then, six years ago, his daughter approached him about what it would take for her to come back and help run the ranch. “Our ranch is a legacy that we are very proud to be able to pass on to our children and grandchildren. Our grandchildren will be the seventh generation to own the original homestead. We are very proud of that,” Myers said.
Myers developed some health problems, and could no longer run the ranch by himself, so the family started discussing how to transition the management of the ranch to Myers’ daughter and son-in-law. “We have some goals and visions we have shared with our family. There have been a lot of kitchen table talks where we have set up a plan,” he said.
Myers stressed the importance of communication during the transitioning process. “You have to have good communication and care. Everyone has to be on the same page and express their feelings, which isn’t always simple to do. It is important to address problems before they get out of hand,” he said.
“I think we have as good of a transition plan as you could hope for, but it is not perfect. Everyday we need to look at it, and keep it flexible. You can’t put it on a shelf and say it’s done. There are continuous changes and compromises that need to be made. We just consider it a work in progress. We talk about it, and we don’t keep secrets from one another,” he said.
“The hardest part of being in business with family is communication,” Hay Springs, Neb., rancher Brock Terrell shared with other ranchers. “I talk every night on the phone with my dad to share ideas,” he said.
Terrell, and his wife, Heidi, invested into his family’s farming and ranching operation five years ago. It has been a challenge, he said. “When we ranched on our own, we had a minimal amount of equipment. Our operation now is primarily on leased land, so most of our investment is in the operation itself. We had lawyers and CPAs to help with the transition, but the younger generation was buying into a business full-fledged and fat. We have a lot of equipment, and looking back on it now, it might have been better to shrink the business down some to avoid capital gains,” he said.
If he had to start over again, Brock said he would approach transitioning differently. “I would want to know what their expectations of me are, in regards to a more defined role, and how the transition will take place. My wife and I are very black and white when it comes to business, but I think my parents are more emotional. Not that either of us are right or wrong. We definitely don’t do things the way they have always been done, so we have to communicate a lot,” he said. ❖
— Clark is a freelance livestock journalist from western Nebraska. She can be reached by email at firstname.lastname@example.org.