Three Succession Planning Tips

Current finances taxes and communication all play a role in succession planning. ( Farm Journal )

Succession planning can be a contentious topic at the dinner table on family farms across the country. The conversations maybe getting more difficult during a down milk market as families have tough discussions about continuing the dairy business.

Farm estate planning specialists are good people to rely on when going down the path to succession planning. Polly Dobbs, attorney and owner of Dobbs Legal Group in Indiana, and Joy Kirkpatrick, succession outreach specialist at the University of Wisconsin’s Center for Dairy Profitability, both work regularly with farm families to navigate the nuances of succession planning.

Here are a few considerations they offer:


A good starting point for any succession or estate plan is to look at the finances of the business.

Kirkpatrick believes a good financial analysis needs to be in place to ensure goals for the farm can be achieved through succession planning. This type of analysis would determine if additional family members can come back to the operation. Considerations would include the living expectations of family members and possibly the costs of upgrading some of the farm’s facilities.

“If they don’t have that yet, getting their financial information organized and working with someone to do that is a good first step,” Kirkpatrick says.

Dobbs explains this isn’t the simple information shared each year with a banker for an operating loan, it tends to be more complex.“Estate planning is like a giant jigsaw puzzle, so in order to get the succession plan right, you need to have all of the details,” Dobbs says.

Assets need to be listed to the person’s name that they are currently held, this includes individuals or spouses.

Fair market value can be a sticking point Dobbs adds. Machinery and equipment is often listed at fully deprecated value. “For planning purposes, we need to know what you could sell it for tomorrow. Not what your income tax preparer reports it at because it has deprecated,” Dobbs explains. Land and cattle would similarly need to be assessed at the current market value.


Starting Jan. 1, 2018, each individual person has a federal gift and estate tax exemption of $11.18 million. The amount doubled from the previous year after the Tax Cut and Jobs Act was signed into law.

Dobbs says many farmers were worth $11 million, but worth less than $22 million, which would include a joint gift from spouses. Estate plans already in place could be adjusted, but Dobbs cautions producers not to get too far ahead of themselves.

“At this point, we recommend carefully re-examining the status of things because the laws temporarily expire at the end of 2025,” Dobbs says.

By 2026, unless the law is made permanent, the exemption will move back to $5.49 million for individuals and $11.18 million for a married couple.

“For those who are worth more than $22 million, this is a window of opportunity to take some action and push some assets on to the next generation,” Dobbs says.

For larger farms, this could result in a major savings because the estate tax is 40%. “This is the window of time to do some planning in a team approach with your income tax adviser, and the CPA needs to be at the table with a financial planner and the attorney,” Dobbs says.


Working on the technical aspects tends to be a focus for many families during succession planning, such as navigating the tax burden and structuring the business. However, Kirkpatrick advises families don’t forget to communicate on a regular basis.

“Blending family and business can be very difficult,” Kirkpatrick says.

Succession planning meetings might need to be held with a facilitator present who is aware of different circumstances on the farm, such as an attorney, extension specialist or accountant.

Management decisions typically made by the owner generation might need to be talked about with the incoming generation to help explain the thought process and to serve as important learning opportunities.

“We really encourage people to lay key decisions out on the table and have conversations about the whys of decisions, of management aspects so that the reasoning can be more transparent,” Kirkpatrick says.


Farm Journal Legacy Project Conference

Jan. 14-15, Hilton Chicago

Are you prepared to pass on your family’s legacy?

Dive deep into the logistics of creating a sound succession plan at the Farm Journal Legacy Project conference. Experts Polly Dobbs, Paul Neiffer, Rena Striegel and Dick Wittman will provide insight and answer questions on how to take inventory of your current situation, resolve conflict and navigate the many legal and tax tools.

To learn more or register, call (877) 482-7203 or visit