The U.S. Department of Agriculture's National Agricultural Statistics Service (NASS) reports that family-owned farms account for 97% of the 2.1 million farms in the U.S., but only 30% of those farms survive into the second generation, and 12% operating by the third.
One of the reasons farms have a difficult time surviving is because they don’t have a survival plan, and the results of not having a succession plan usually ends in disaster. The Pathwise Group, along with JCCS and the law firm of Scott, Tokerud, and McCarty, are aiming to assist farmers early with estate preparation to avoid potential struggles.
"It's really seen as a complex process. When you have an attorney, then you need an accountant, a CPA, then you need either a financial advisor or senior planning group, so it really is siloed traditionally, where people don't come together and work as a team to help with the estate planning," Pathwise Group founder Jared Brown stated.
Keith Tokerud is a lawyer who specializes in assisting those with estate planning. He said that it's become an even greater concern where a multi-generational farm or ranch operation is lost because of poor planning, which has a great chance of leading to conflicts amongst family members.
"No one wants to do any planning because it involves talking about their death, which isn't a very pleasant topic," Tokerud said. "Plus there's a lot of really difficult issues involving farm and ranch planning or any kind of succession planning. They usually have several kids. Do they need to favor one of the kids who's on the farm at the expense of the kids who have gone out to Seattle or Portland? Maybe. Very often we do. That's pretty tough. A lot of times our communication issues are between husband and wife. There's a lot of tax issues and it's a full-time job keeping up with the tax issues, which is why I want somebody so that I can bring to bear what I know, but also give the best tax advice."
JCCS is an accounting firm that helps assist with this process. Bonnie Robertson — the Senior Manager for JCCS — mentioned that not only has it become increasingly common for farmers and ranchers to abandon estate planning. It typically results in negative consequences.
"The most common thing is the lack of (planning), and I think they get into their 80s, and they're trying to think about what to do, and they're not even capable of figuring it out because they're past that time, and so the kids have to help the parents," Roberton stated.
The good news is that it doesn’t take much to build a solid plan that will not only ensure the farm’s transfer to the next generation but the reduction of conflict as well.
"I think the plans need to change all the time because the landscape is changing all the time. Whether it'd be the tax implications, or families doing different things, they change their minds, so they constantly going to have to be changing their minds," JCCS Senior CPA Dan Konen stated. "It's important to stay up on what you're wanting to do, where you want to go, what your goals are, and be ready to make adjustments when they appear."
Pathwise Group will offer free farm and ranch seminars to prepare farmers on how to secure their assets and be ready to hand their farms to the next generation.
