Family Finds a Farm Succession Solution
Published: Friday, December 2, 2022
Jerry and Susie Hayden aren't the first farm family to wrestle with the question of succession planning and fairness. After a months-long process, they feel as if they finally have a solution.
The Haydens began farming in Hebron in 1972, and after 50 harvests are passing on the farm to their children. However, only two of the four children have decided to move forward with farming, and the Haydens were faced with the challenges of making a fair transition.
As the farm grew, they began placing land and equipment under the names of Matt and Bob, their two sons who came back to the farm, as well as under Jerry's name. This was to ensure they would not surpass their lease limit, but all the paperwork became complicated. The Haydens also set up trusts and wills, adding to the complication.
The question remained: How could they transition the farm to only two of their children and still treat the other two, Jeremy and Jamie, fairly in the process?
"The farm kids are doing all the work, and you want the off-farm kids to get their share but not affect the farming," Susie explained.
To help find a balance, Jerry and Susie hired a lawyer to get everything organized. It was going well until the lawyer retired, which put the Haydens back at square one. This time, they turned to Indiana Farm Bureau.
Susie attended the 2021 INFB State Convention, where Polly Dobbs, who specializes in estate and succession planning, was a keynote speaker.
The Haydens liked what they heard, so the family began working with Dobbs' team through INFB's Indiana Agricultural Law Foundation program, "Estate and Succession Planning for the Family Farm."
According to John Shoup, director of the Indiana Agricultural Law Foundation, "the program provides practical information regarding the tools of estate planning as well as current developments in the field. The unique aspect of the programming is an emphasis on facilitating family communication and understanding family dynamics."
It was not a short process. Susie and Jerry suggest all farmers get started as early as possible on succession planning.
Through the help of the Indiana Agricultural Law Foundation program, Susie and Jerry created a partnership with Matt and Bob using limited liability corporations for the land and equipment they own. This way, instead of having one limit for the farm, they now had four. This solved their problem in expanding the farm.
The Haydens own approximately 450 acres of the 4,500 that they farm. They grow corn, soybeans, wheat, hay and raise a herd of mini-Herefords for freezer beef. All of this must be accounted for in the transition.
"When they pass away, everything should be in writing," Matt said, referring to his parents.
"Navigating the transition to the next generation requires planning and communication," Shoup said. "Family dynamics, situations where some family members are not active participants in the farm and the process of determining aspirations of family members often complicate this process."
The program stresses the importance of planning for multiple scenarios, including death, divorce and disability. The Haydens say it is important to continue reviewing the succession plan and making updates when necessary.
"Often times, managing family relationships and arriving at a harmonious solution is the most challenging part of the estate planning process," Shoup said.
This was true for the Haydens and is the reason why they encourage others to start early.
"Find yourself a good team," Jerry advised. "It's not an overnight process."
He went on to describe how unpredictable the process can be, such as when they had to transition to another lawyer. Susie added that it is a good idea to involve the person designated to take over the bookkeeping in the process. In the Haydens' case, this is Chari, Matt's wife.
The estate and succession planning program through the Indiana Agricultural Law Foundation is free, but the family must assemble the team of estate planning professionals. Shoup says a typical succession planning team may include an attorney, financial advisors, an accountant, insurance professionals and sometimes succession planning specialists.
"Winter is a good time to start making sure everyone is satisfied. We're pleased with the way it's been going," Jerry said.
"You just have to trust that the lawyers have it the way you want it," Susie added.
The Haydens have a reputation in Lake County for their good stewardship of land, Matt said. He hopes to continue that legacy and prepare for his two sons to join him on the farm.
The solution Susie and Jerry found in the estate and succession planning for the family farm program was to split the land they own between all four of their children but regulate the use of the land so that the non-farming siblings must rent the land to the two who are farming. This way, all four earn revenue and the land stays in agriculture.
Whether or not the land continues to be used for farming is the first question farmers must answer for themselves when preparing to transition the farm into the hands of a successor. The answer to this determines who should get the land, which can lead to questions regarding ways to keep things fair for children who may be parting ways with the farm.
Three things the Haydens learned are: start early, keep the plan current, and fair does not always mean equal.
"Just knowing that the succession plan is in place and the off-farm kids are not left out of a portion of the land makes it easier," Susie said.
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