Family farms dot the rolling hills of Tennessee, and a degree of forethought is required to ensure a farming operation passes smoothly from one generation to the next.
Although Phillip and Linda Hayes knew exactly how they wanted the assets from their farm in Liberty to be distributed upon their passing, the couple had not put their wishes in writing – and their lack of a succession plan was a source of concern.
“We wanted it in writing because we knew that if there wasn’t written documentation, the state might make the decision [about how our assets were distributed] for us,” Phillip Hayes says. “We’d talked about it for years but had no idea how to get started.”
In 2019, the couple – third-generation farmers who raise cattle and hay – worked with John Rodgers, an attorney and partner in Kious, Rodgers, Barger, Holder & King, PLLC in Murfreesboro, to create a succession plan to guarantee that their wishes would be carried out.
Succession planning helps to protect assets, heirs and agricultural heritage. The plan often includes documents such as wills or trusts, durable powers of attorney and health-care directives, along with instructions for transferring ownership of land, equipment, livestock and crops to the next generation.
“One important reason to get this done is to honor all of the work that you, and the generations before you, have put into the farm,” Rodgers says.
Prioritizing the Process
While succession planning is important, Rodgers admits that farmers often delay the process. In fact, 71% of retiring farmers in the U.S. have not created a succession plan. According to Rodgers, putting wishes in writing does more than transfer assets – it also provides peace of mind for loved ones.
“Succession planning eliminates the risk of future problems, like financial catastrophes and family disputes, and provides some certainty for your heirs and employees,” Rodgers explains. “If you don’t do your own succession plan, the state of Tennessee will do it for you.”
Phillip and Linda’s daughter was one of the main motivations to turn their conversations about succession planning into a legal document. They wanted to ensure that she would receive their assets and would not be left dealing with paperwork after their passing.
“When my dad died, we had no idea what assets he had, where to look or who to call to sort it all out,” Phillip recalls. “It could have been worse, but it could have been a lot easier if he’d had a succession plan. We don’t want our daughter to have to deal with the business end of things in her time of sorrow.”
To get started, the couple made a list of their assets and their wishes for how those assets would be distributed. It was one paragraph on a piece of paper. Rodgers took the information and turned it into several pages of legal documentation, with the entire process taking about six weeks.
Securing the Future of the Farm
Each succession plan, like each farming operation, is unique. Rodgers suggests collaborating with an attorney and an accountant or financial manager to evaluate the options for passing the farm and other assets to the next generation.
In addition to the distribution of assets after death, a succession plan might also include directives for how the business is structured and who will manage it upon retirement. Once the plan is complete, it should be reviewed and updated if needed every five years.
Rodgers calls a succession plan a living document, adding, “You will spend a lifetime creating and maintaining it.”
In their current succession plan, the Hayeses are leaving all of their assets, including the farm, to their daughter. The couple – under the guidance of Rodgers – will monitor changes to the estate tax laws that might cause them to alter their plans.
“The base [of our succession plan] is there, and all we have to do is make one change, not start all over from scratch,” Linda Hayes says.
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The couple is not sure that their daughter, who lives in Michigan, will want to return to Tennessee to grow hay and raise beef cattle on their family farm, but their succession plan ensures that she will have the power to decide on the future of the farm.
“It takes a lot of the burden off of her to be making decisions at a time when she won’t want to be thinking about those things,” Linda Hayes says. “It was such a relief to get it done, seal the envelope and know that it was taken care of.”