Succession planning is not a “one and done” event. The real work begins after the plan is in place, as circumstances change and the original roadmap becomes outdated.

For many farm and ranch families, creating a succession plan can feel like reaching the finish line of a long and challenging process. After all, sitting down with family members, attorneys, accountants and farm succession experts to outline the future of the operation takes considerable time, effort and emotion. However, succession planning is not a “one-and-done” event. The real work begins after the plan is in place, as circumstances change and the original roadmap becomes outdated.

In agriculture, where the industry’s landscape and individual farm dynamics evolve continuously, ensuring your succession plan is current is critical to the long-term success of the operation. The question is: How do you know when it’s time to revisit and revise that plan? Let’s explore the key triggers that signal it’s time for a farm succession plan update and how both transitioning owners and successors can navigate these changes effectively.

1. Significant changes in the family structure
A farm succession plan is built on the unique structure of the family. Therefore, any major change in the family – whether a birth, death, marriage or divorce – can significantly alter the dynamics on which the plan was based. These events often require adjustments to the plan to account for new heirs, changes in the number of potential successors or shifts in family members’ responsibilities.For instance, the arrival of a new family member who may one day wish to be involved in the farm could necessitate a long-term adjustment to ownership or operational roles. On the flip side, a death in the family could leave a gap in leadership or management that needs to be addressed immediately. Similarly, a divorce may complicate asset ownership or alter the intended distribution of land and equipment. If your family has experienced any of these life events, it’s time to review the succession plan to ensure everyone’s needs and roles are clear.

2. Changes in farm operations or business model
Farming and ranching are highly dynamic industries. Changes in crop or livestock production, the purchase of new land, new business ventures (such as agritourism or direct-to-consumer sales) or shifts in the farm’s overall business model can all impact a succession plan.For example, if the farm has significantly grown or diversified since the original plan was created, the current business structure may no longer reflect the operation’s reality. The introduction of new technology or significant investments in infrastructure might also affect long-term planning. Additionally, if the farm is transitioning from conventional practices to organic or regenerative methods, the expectations and skill sets of the next generation of farmers may need to evolve to match the farm’s new direction. These operational changes are essential to factor into the succession plan to ensure the farm remains sustainable for the next generation.

3. Health or capacity of key individuals
Succession planning revolves around the capacity of certain key individuals – particularly the current owner or primary operator. A decline in health or capacity can signal the need to accelerate or modify the succession timeline.Farmers and ranchers are known for their resilience and work ethic, often continuing to work well past traditional retirement age. However, declining physical or mental health may make it difficult for a senior owner to fulfill their intended role for as long as originally planned. This could require earlier-than-expected leadership transitions or shifts in responsibilities among family members or employees.Likewise, if the successor is facing health challenges or personal issues that limit their ability to take on a larger role in the operation, it’s important to reassess the succession plan. Open and honest conversations about health and capacity can prevent disruptions and ensure a smoother transition of leadership when the time comes.

4. Economic or industry shifts
The agricultural sector is subject to volatile markets, fluctuating input costs and changing government policies. These external factors can directly impact the profitability and sustainability of an operation. If the farm’s economic standing has significantly changed – whether for better or worse – the succession plan may need to be adjusted to reflect the current financial landscape.For example, a farm experiencing substantial growth and profitability may consider expanding the roles and responsibilities of multiple successors. Conversely, if the farm has struggled financially due to market conditions, it may be necessary to streamline operations or reassess the feasibility of supporting multiple family members through ownership or management positions.The emergence of new government programs, tax laws or estate planning rules can also warrant a plan update. Given the complex nature of farm assets, which often include both high-value land and low-liquidity equipment, any changes in tax law affecting estates and inheritance should prompt a review of the succession plan to avoid unintended consequences.

5. Shifts in family goals or successor readiness
dFamily goals are not static. Over time, the needs, aspirations and readiness of both the current generation and the next generation of farmers may evolve. Perhaps the original succession plan was created when oneof the children was undecided about their involvement in the farm but has since expressed a desire to return and play a significant role. Conversely, someone who was once committed to taking over the operation may have chosen a different path, requiring adjustments in management and ownership expectations.Another factor to consider is the readiness of the next generation to take on leadership. If the successors have been building skills and are now ready to take on more responsibility, the plan should reflect this increased involvement. Alternatively, if the successors need more time or training, the timeline for transition may need to be extended.Family meetings are an excellent way to reassess the goals of all parties involved and ensure the succession plan reflects both the realities of the farm and the aspirations of family members.

6. Aging of the succession plan
Even if no significant events have occurred, farm succession plans should be reviewed periodically to ensure they are still relevant. A good rule of thumb is to revisit the plan every year as a part of your annual planning meeting. The farm’s financial picture, legal environment and family dynamics can all shift subtly over tie. Regular check-ins on the plan allow for minor adjustments and prevent larger issues from developing down the road.Aging farm succession plans may also fail to account for new tools and strategies in estate planning, governance or tax planning that could benefit the operation. Working with a team of experts – legal, financial and farm management advisers – on a regular basis can help identify these opportunities and keep the plan up to date.

7. Unexpected opportunities or challenges
Agriculture is a business filled with both uncertainty and opportunity. An unexpected land purchase opportunity, a profitable business venture or even the development of valuable partnerships might create new opportunities for successors or shift the long-term vision of the farm. These changes often require updates to the succession plan to ensure the new direction aligns with the family’s goals.On the other hand, unexpected challenges – such as natural disasters, the loss of a key employee or market disruptions – can affect the farm’s structure and financial health, prompting a review of the succession plan to navigate these hurdles effectively.

Farm succession planning is a vital process that requires ongoing attention. As your operation grows and changes, and as family dynamics evolve, keeping your plan up to date ensures the transition of ownership and management will be as smooth as possible. Transitioning owners and successors should regularly communicate and collaborate to ensure the plan reflects their shared vision for the future. By revisiting your farm succession plan during major life changes, business shifts or simply as time passes, you can safeguard your family’s legacy and ensure the next generation is set up for success.

This article also found here on Progressive Cattle – November 2024

Article by Rena Striegel, President of Transition Point Business Advisors

Transition Point Business Advisors as has a program entitled, The DIRTT Project, which gives the American Farmer full control of their succession plan from beginning to end.  Go to our website to learn more about The DIRTT Project.