Owning and operating a farm is not uncommon in Pennsylvania. For many, they seek to keep the farm in the family. While creating an estate plan is an excellent way to help memorialize these wishes, this is not the only way to create this protection for one’s farm. Succession planning is another way to create protections and help ensure that the farm continues in the correct hands.
Estate planning versus succession planning
While these two processes differ in numerous ways, the focus is on how they interact with a farm and how each process could be used to protect the farm as a family business. In short, an estate plan alone can dictate how the farmland will be passed on to the next generation. This is easily accomplished, as each heir can take their portion, or a single heir can take ownership. However, if their goal is to ensure that the farm as a business continues, this is where succession planning comes into play.
The importance of succession planning
While an estate plan can help with the transfer of title for assets, such as a farm, it does not dictate how the farm will be run and operated. Thus, a succession plan can address this. In fact, this process helps one put the farm in a position to transition to the next generation. The succession planning process is focused on preparing the farm to succeed now, during the transition and after the transition.
All in all, a main goal of succession planning is to ensure that the business will stay intact. However, it is important to note that succession planning is a process and is not an event. As such, it should have incremental goals over time to help with a successful transition from one generation to the next.
When a business like a farm has remained in a family for generations, it is often imperative that this continues for many generations to come. Because the goals and initiatives of a business often changes over time, the means to hand the business down can change as well. Thus, it is important to understand what documents to have in place, which ones may be necessary to include and whether anything needs to be updated in an estate plan.