Intergenerational communication can sustain family farms through succession

University Park, Pa. -- For farmers hoping to keep their operations in the family and running successfully, intergenerational communication is a valuable tool, said two specialists in Penn State's College of Agricultural Sciences. Operating a family farm is not like operating any other business, explained Matthew Kaplan, associate professor of intergenerational programs and aging in Penn State's agricultural and extension education department. Since the emotional cost of "firing" a family member often is quite considerable, farming families first should try to work out disagreements to survive, rather than resort to more drastic action.

"Farm operations and business prospects are profoundly influenced by family relationships," he said. "For small, family-owned and operated farms to survive and thrive, it is important that family members communicate effectively with one another on a range of important business-related topics, including business decisionmaking, farm succession planning, career planning and retirement planning."

More than 90 percent of Pennsylvania’s farms are family-owned, but it is likely that fewer than half have developed detailed farm succession plans, said John Becker, professor of agricultural economics and law.

"Getting started to think about these questions is the most important step," he said. "Building momentum to continue the process is difficult but necessary to reach a satisfactory conclusion. Many families find it challenging to begin the process of thinking about who will succeed to the farm business and how other heirs who are not involved in the business will be treated. The most difficult question that many families face is whether to treat their children fairly in a business succession plan, or to treat their children equally in the plan, even though some are not interested in the business or in seeing it thrive for the future."

The consequences of this can be surprising to those who do not plan and then are confronted with the results later, said Becker.

"If the farm is simply inherited by the succeeding generation of operators, inheritance taxes and other fees that could have been avoided or minimized may cripple the farm and its new owners," he said. "Inadequate farm succession planning may result in heirs who are incapable of running the farm business, family conflict over whether the farm continues in farming or is converted to a more financially productive use, prolonged legal battles over what the farm is worth to the estate and heirs, and partition of family-owned and operated farm business assets to satisfy heirs who simply want to 'cash in' their share of the business rather than invest in it."

Becker offered several tips for planning the business aspects of farm succession:

-- Enlist professional legal, tax and investment consultants to help current owners consider their planning options and retain flexibility to deal with changing circumstances.

-- Choose a successor who has business management, production and leadership skills to make the business a success.

-- Develop timelines for a sequential transfer of the business that allows the younger generation to build equity in the business gradually, receive managerial training and assume managerial roles before enacting the formal transfer.

-- Maintain open lines of communication to help families develop an integrated vision for the future of the farm (and family) that accommodates individuals’ concerns and experiences. This is particularly important during times of challenging business conditions and limited prospects.

"For example, diminishing farm assets may stimulate older members of a family to worry about financing their retirement years, whereas young family members may be influenced to reconsider career decisions," Kaplan said. "Family conversations are critical for helping family members to understand how they can work together to enhance the overall farm business while achieving individual goals and maintaining positive family relationships and growth."

"Farm transfer planning is a dynamic process involving a complex interplay between interdependent family members. When there is open communication and shared decisionmaking, there is less conflict, greater cohesion within the family and more agreement on basic issues within the family, and family members report less stress and more satisfaction with their family lives."

However, it can be an uphill battle to get families to communicate effectively, said Jon Nussbaum, Penn State professor of communication arts and sciences, who specializes in intergenerational communication.

"We know that it is not easy to get families to communicate about important and serious topics that involve multiple generations of family members, such as caregiving," he said. "This avoidance ultimately leads to poor decision-making, particularly during times of family crisis that potentially can have significant economic, legal and interpersonal ramifications. A discussion of farm transfer within the family is one of these serious topics that multiple generations of family members need to discuss, but unfortunately, often avoid."