Ranch transition requires some homework
“Give with warm hands.” The proverb was the take-home message from Bethany Johnston, who is the ranch transition task manager with the Nebraska Grazing Lands Coalition. She gave producers some pointers on passing on the ranch or farm to the next generation during her presentation, The Future of Your Ranch — The Future of Your Vision.
During a recent workshop, more than 100 farm families attended. What struck Johnston as worrisome was only six of those families had a completed and signed transition plan in place that they were satisfied with. “Most people don’t have a complete estate plan. What you need to remember is if you die tomorrow, your wishes will not be carried out if your plan is not finished and signed,” she said.
Johnston tells producers to make the transition plan a priority, while they are still alive. “Do it while the parents and grandparents are still alive. It isn’t just about the farm or ranch, it is also about the knowledge that will be lost if you don’t do it while they are still alive,” she said.
WRITE IT DOWN
To start a transition plan, Johnston tells producers to ask themselves what they want the ranch to do in their lifetime, and what they would want it to do when they are gone. Write it down, along with their vision and goals. “It is hard to figure out where to start because just like ranching, ranch transition is a huge, complex animal. But, it is like a marathon. You have to take it one step at a time,” she said.
“Ask yourself what things you want to have happen to your ranch, and what things you don’t want to have happen,” she said. “What do you want to protect the ranch from? Do you have children who don’t get along, addictions in the family or business like gambling or drugs, debt or nursing home expenses? Are you worried about your heirs dividing up the ranch if they can’t get along?”
Other considerations are divorce, remarriage of the surviving spouse, and stewardship. “If you just spent the last 60 years getting the ranch in shape, what if your heirs don’t manage it as well,” Johnston said.
Johnston tells producers that a ranch transition handbook, Ranch Transition when you’re not in Control, is available on the Nebraska Grazing Lands Coalition website. The handbook has a script for people who have a hard time communicating with family. The script helps people get conversations started and suggests questions they can ask that they need to know the answers to.
The golden rule of farm transition is whoever has the gold gets to make the rules. “If you own the assets, you get to make the decisions,” Johnston said. “It is frustrating for younger generations because they don’t get to make the decisions. When you talk to the older generation, you need to tell them you need access and control when you take over, even if you don’t own the land,” she said.
FAIR VS. EQUAL
One area many transitioners struggle with is the concept of fair versus equal. If you have four children, should each of them get a 25 percent share? What if only one child came back to work on the farm; is that still fair?
If the on-farm heir was unpaid, the parents may choose to compensate that child through assets specified in the will. “If you choose to compensate them with land, make sure the rest of the family or business is aware of it before you do it,” Johnston said.
Farm and ranch transition is specialized, and Johnston suggests finding a lawyer that specializes in it. Ask for recommendations from other people, like your family lawyer, CPA or friends. “I had one producer who even interviewed potential lawyers. He had a list of lawyers and a list of questions he wanted to ask,” Johnston said.
Ask what the lawyer will charge for estate planning, and determine if that figure is realistic. Some lawyers charge by the hour, and others charge a percentage based on what the estate is worth. “If you have a $40 million ranch, and the lawyer tells you he will charge one percent, $40,000 to help develop an estate plan is really expensive and not very realistic,” she said.
Before meeting with the lawyer, Johnston says producers should write down all verbal agreements they have, as well as copies of all written agreements. Also provide the lawyer with a list of who owns what and how it is titled. Make a list of all assets and liabilities. “It is important for you and your spouse to agree before you go to a lawyer,” Johnston said. “You need to have a clear and united vision. The lawyer is expensive, so don’t use them as a marriage counselor.”
Provide the lawyer with a family tree and how everyone is related. Be prepared to share the skeletons in the closet, like a nephew with a health condition that will be inheriting but it could impact his disability benefits, or the son with a gambling problem. The lawyer can help with these situations,” Johnston said.
Help is out there, she said. In Nebraska, the Rural Response Hotline has financial planners and attorneys who hold clinics each month. Producers can make an appointment to meet with them confidentially to gain advice and insight on estate planning. ❖
— Clark is a freelance livestock journalist from western Nebraska. She can be reached by email at firstname.lastname@example.org.