How they’re transferring the farm
Here’s a look at how some Dakota farmers and ranchers are transferring ownership and management control:
Ray and Carol Erbele, Streeter, N.D., have a formal succession plan in place to transfer their ranch to their son, Tim, and his wife, Ronda, when they die. Their daughter, Tammy — who lives and works off the ranch — will receive the cash from a life insurance policy they have purchased. The plan is something everyone in the family has discussed and approved.
Ray and Tim are working together on the ranch. Each owns his own land, cattle and machinery, but they pool resources and operate as one unit. They divide expenses and income according to the shares they own in the combined operation.
• Tim Erbele is increasing his share in their ranch “pool.”
• Gabe Brown transfers 5% of some assets to son Paul yearly.
• Opportunities Farm could be a model for getting started.
As part of the transition process, Tim and Ronda are increasing their shares by buying more machinery and land and contributing more replacement heifers to the herd than his father and mother.
“This is easy and simple,” Tim says. “We don’t worry about whose grain we are combining or whose calves we are selling. We just split everything by the share percentage.”
The way South Dakota State University’s Opportunities Farm is operated is a model of how a farm transfer might be structured, says Barry Dunn, dean of the SDSU College of Agriculture and Biological Sciences.
The SDSU Foundation owns the farm, near Lennox, S.D. It was given to the university as a gift. But rather than working for the SDSU Foundation, Matt Loewe — the farm manager — is an employee of a separate corporation that was created to run the farm. The corporation rents the farm from the SDSU Foundation.
Having a separate corporation gets the SDSU Foundation out of the day-to-day running of the operation, and the rental
arrangement has enabled Loewe — a young producer — to farm 1,100 acres and feed 2,000 head of cattle a year, Dunn points out.
Loewe isn’t buying the farm from SDSU, but a private landowner could add that component to the arrangement.
Gabe Brown, Bismarck, N.D., has a 5% solution for transferring the family ranch to his son, Paul.
Gabe, 50, is transferring 5% of the non-machinery assets each year for the next 20 years to Paul, who recently graduated from North Dakota State University.
In 20 years — when Paul owns 100% of the non-machinery assets — Gabe says he will retire and sell machinery to finance his retirement.
Gabe uses the same formula to pay Paul for his labor and management. The first year Paul received 5% of the ranch’s net income. Each subsequent year he will receive 5% more. Paul receives 100% of the income from any new enterprise he starts on the ranch.
“We wanted something simple,” Gabe says.
Team effort: Ray Erbele (front) and his son, Tim, are working together to keep the ranch in the family.
Little by little: Gabe Brown (standing) and his son, Paul, have a 5% scheme for transferring the farm to Paul.
This article published in the August, 2011 edition of DAKOTA FARMER.
All rights reserved. Copyright Farm Progress Cos. 2011.