Plan for the future Hanson: Ranch succession decisions shouldn’t be put off
“The hardest thing, as a parent, is being fair to all our children,” according to a Harlan Agribusiness professor emeritus with the University of Nebraska-Lincoln.
Ron Hanson explained that if parents help one of their children get started in the business, then in the final estate, all of the children should receive an equal share because the child who stayed has already received a reward.
“If not, that child made a sacrifice the other children didn’t and should be rewarded for that sweat equity,” he added.
“I hate promises and sweat equity, because the children who stay on the farm are seldom rewarded for sweat equity,” Hanson revealed. “I would encourage parents to help their child build assets, so they can successfully take over. Remember, what they someday inherit is what they had a hand in helping us build.”
Building the plan
Lynn Myers, who ranches near Lewellen, Neb., said their ranch has been in the family for more than 100 years.
“Our grandchildren will be the seventh generation to own the original homestead. We are very proud of that,” he told more than 100 producers during the Nebraska Grazing Conference. “We have some goals and visions we have shared with our family. There have been a lot of kitchen table talks where we have set up a plan.”
“Basically, our children will be trustees, and when they are gone, our grandkids will take over,” he said.
Myers said for the last 30 years, he didn’t think any of his children would return to the family operation. But six years ago, his daughter asked him what it would take for her to come back and help run the ranch.
Soon after, Myers developed some health problems that sped up the succession plan because he could no longer run the ranch by himself.
“Now, my son-in-law is the day-to-day manager of the place. They came back to the operation because they wanted their kids to have the same opportunities they did, but they took a big pay cut to do that,” he said.
“I think we have as good of a transition plan as you could hope for, but it is not perfect,” Myers continued. “Every day we need to look at it, and keep it flexible. We can’t put it on a shelf and say it’s done. There are continuous changes and compromises that need to be made.”
“We just consider it a work in progress. We talk about it, and we don’t keep secrets from one another,” he added.
Hanson shared six tips for helping producers accomplish what the Myers family has – building a successful succession plan.
First, ranchers should have a vision of what they want to happen to their estate once they’re gone.
He also told producers to write down their thoughts and feelings, as well as to seek professional help from an attorney, a lender, a CPA and an estate planner. There will be some expense, but it is well worth the cost, Hanson said.
Don’t make assumptions about the feelings of others, said Hanson.
“Ask questions like if I were to take over the operation, will that ever cause problems between us? If my share of the estate is larger than yours, will that cause problems between us?” Hanson suggested.
He also emphasized the importance of thinking through the consequences, saying, “Put yourself in the other person’s position. How would you feel if you were left out?”
Finally, Hanson said it’s most important to just get things done.
“Goals without deadlines are nothing more than dreams,” Hanson told producers.
Brock and Heidi Terrell of Hay Springs invested into the farming and ranching operation owned by Brock’s side of the family several years ago. The partnership originally consisted of Brock’s dad and his brother, and later Brock, his own brother and a cousin.
“When my cousin passed away 10 years ago, my uncle wanted out to retire,” he explained. “He did the books and made most of the final calls.”
When the partnership transitioned to Brock’s dad, it wasn’t a smooth transition for Brock’s generation.
“My brother took the seedstock cows and went on his own,” he explained. “My uncle still owns some of the land we lease and helps with advice and making sound decisions, but the hardest part has been who makes the decisions now and does the books.”
“Taking care of the cows is the easy part,” he explained.
Brock and Heidi bought into the partnership five years ago.
“When we ranched on our own, we had a minimal amount of equipment. Our operation now is primarily on leased land, so most of our investment is in the operation itself. We had lawyers and CPAs to help with the transition, but the younger generation was buying into a business full-fledged and fat. We have a lot of equipment, and looking back on it now, it might have been better to shrink the business down some to avoid capital gains,” he said.
“The hardest part of being in business with family is communication,” Brock continued. “I talk every night on the phone with my dad to share ideas.”
“My wife and I are very black-and-white, but my parents are more emotional. We see it as a business – not that either of us are right or wrong. We definitely don’t do things the way they have always been done,” he explained.
If he had to start over again, Brock admits he would approach transitioning differently.
“I would want to know what their expectations of me are, in regards to a more defined role, and how the transition will take place,” he said.
Myers also notes the importance of communication.
“We have to have good communication and care,” he explained. “Everyone has to be on the same page and express their feelings, which isn’t always simple to do. It is important to address problems before they get out of hand.”
Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.