With a majority of dairy farms in the United States being family-owned and operated, transitioning the farm to the next generation is a key component to the continued success and future survival of many operations. The transition process is complex and must be done properly to avoid serious financial and family relationship consequences. Considering there’s no standard way to transition a farm, keeping these key points in mind will be a helpful guide:

Create a transition and personal estate planning team. This team should contain two units, the producers and the professionals. The producer part of the team should include both the entering and exiting parties of the operation, and spouses of the parties involved. Including siblings that are not involved in the transition will allow the exiting parties to communicate their wishes for the farm before they retire or pass away. Professionals may include: the farm attorney, accountant, tax and financial consultants, and an extension agent.  Adding professional consultants to the team can help facilitate an open, honest, and respectful channel of communication.  This can insure that both entering and exiting party’s goals can be met with the transitioning of the farm.  

Establish Goals. Individual, family, business and retirement goals should be established by the producers to give the professionals a direction in creating the transition plan. These should include what each individual does or does not want for the farm, their family, and themselves. First, each person should individually create a list of his or her short and long term goals. These goals should be specific, measurable, attainable, realistic, and have a time frame for implementation. Once each member has their individual list, each generation should combine their lists, prioritizing them together. Lastly, both generations should meet, discuss their prioritized lists, and prioritize the goals into a final list. Once this list is finalized, take it to your team of professionals so that they can develop a plan to fit your combined and agreed upon goals. Have the entire team meet once this plan is developed to discuss how it should be executed.

Do not over think the transition process. Many decisions are involved in the transition and personal estate planning process that are outside the expertise of the farmers involved. Trying to decide between different transfer strategies, such as sole proprietorships or partnerships and corporations, may confuse and frustrate you and inhibit you from moving forward. Involve the experts to help you decide the best means to accomplish your goals. The producers involved in the transition should be responsible for implementing the plans made by the professionals.

Put everything in writing. The transition plan should be written and copies provided to all members involved in the transition. Establish a timeline in which the transition is to be completed. Because of the extensive amount of assets to be transferred with a dairy operation, a realistic time frame may be 10 to 15 years.

Communication is key. Hold family business meetings throughout the transfer process to ensure the progress is in line with everyone’s goals. Considering the long time frame of the transfer process, meetings should be held annually to review goals and revise them as needed. Without effective communication, mutual respect and trust, the transition process can be extremely stressful and straining on family relationships.

Authors: Jordan Martinez, Lauren Mayo, and Donna M. Amaral-Phillips, Ph.D.     Printable Version