Farmers are an interesting bunch. My family’s history with farming goes back generations. Now, however, the Coates family farm in northern Iowa is a golf course. I do not have the background of that specific decision to sell, but experience tells me it was not easy for my great-grandfather.
This spring has been surprising and difficult for many farmers. While most planned for exorbitant anhydrous and gasoline prices, fields too wet to plant past the crop insurance cut off have become the largest problem. Competent farmers are accustomed to capitalizing on the unexpected. So why do even well-run farms frequently fall apart in unsurprising generational transitions? And by fall apart, I do not suggest that they stop running. I mean the family’s return on investment drops drastically or disappears completely.
The one time I played that course, I stood on the 18th tee intensely focused on finishing out the game of my life currently at 10 over par. My brother pointed out a gravestone in a cemetery near the tee with our family name on it. At closer inspection, we saw those solemn names of my living grandparents with the last date ready to be filled in. I couldn’t help thinking the next time I come here will likely be for a burial. I finished 17 over par, and forgot my sand wedge on the last green that they had to ship back to me.
And that is what happens to the family farm. It is all business, intense focus, and long hours with multiple generations of family involvement. But at the end of one generation, it is personal, and emotional. First childhood memories, family legacy, and the prior generations’ rejection of numerous offers crowd out the business acumen necessary for objective planning of this useful asset. The farmstead is the most valuable asset of any farm family, assuming that it is managed well. Without proper succession planning, that asset either becomes someone else’s return or a millstone for your heirs. Be honest with yourself. You have seen it. Don’t let your impressive stewardship of the most productive family asset close out like my round of golf. In your case, you don’t have to play the last hole alone.
Today, my family loves farming. My brother, a highly skilled computer nerd, loves when he gets to help farmers with their ever-increasing technology. I was made to be a financial planner, and I enjoy working with farmers and their unique issues. If my son wants to be a farmer when he grows up, my goal will be to make sure he has the resources necessary for that or any occupation he chooses. To do so, every family asset needs to get the most return possible, even if it has to change character.
Aaron Coates, CFP® CIMA
Valeo Financial Advisors, LLC