How to have a successful transition: talk about asset values

Asset values on the farm are continuously rising – farmland values soar, equipment costs rise and inputs trend upwards. Bringing that variability into a transition conversation can be daunting – but it’s possible.

Farm family coach Elaine Froese says it comes down to one belief: “It’s not about the money, it’s about the vision.”

Froese helps farm families find harmony through understanding. That understanding comes from having robust and tough conversations about what everyone wants and needs.

Froese says the essential conversation tools needed for transition in the face of rising asset values are:

• Ongoing communication
• Ability to listen
• Total transparency

These tools set the stage for the family to take further steps in the process:

• Assess your current state
• Set values, visions and goals
• Connect with experts
• Create a plan

Assess your current state

Is there an appetite for a conversation about the transition? Or at least an openness to begin the discussion?

Using a scale of 1 to 10 to determine family readiness, Froese says if one person is a two and another is a nine, there won’t be a productive conversation, if at all. With such a span for readiness, a family coach can help get everyone on the same page. Or a family coach can continue to discuss unreadiness with the reluctant.

Froese says no matter how much coaching and conversations, some may never be ready to talk about transition. Maybe there’s no acknowledgement of the rising values on the farm. Or maybe the values are overestimated.

Whatever the situation, if there is too much distance, the time may have come to look after yourself. If you can’t afford the price your parents want for their farm, consider other ways you can farm full-time. If your children don’t want to pay fair price for the farm, think about selling it to someone else.

Set values, visions and goals

If the vision is for the current farm business to continue, then it doesn’t matter what the asset value is – it is what it is, and that’s what creates the business. It’s unrealistic for non-farming children to expect to acquire a portion of the assets if the farm business is staying in operation.

The gap — and conflict — can come in transition planning when non-farming children think it’s perfectly realistic to acquire assets, perhaps a desire driven by the rising values.

Don’t consider the farm a pie to be divided up, especially if the goal is to keep the farm in operation. As a pie, there’s the tendency to put all future income streams into the business without developing a mechanism for liquidity in a personal wealth bubble for the older generation for their future income.

Avoid a pie structure so there’s a clearer separation between farm and non-farm assets. Froese points out that this can also head off disagreements over asset values, especially land, since the root may be more about emotional attachment to the farmland than monetary value.

Connect with experts

The best time to bring in an expert such as a financial planner is now – and not waiting until you are on your way off the farm.

A financial expert looks at a transition plan and sees what changes need to be made. They can also assess or recommend experts who will help determine asset values, putting a price tag on land, equipment and inventory... Read More