There’s plenty of good legal advice available on how to transfer a farm or ranch to the next generation. But you probably haven’t heard a list of transition tips that are as practical or as down-to-earth as Ray Erbele’s.
Erbele is a 66-year-old Streeter, N.D., rancher and sale barn owner, former cattle buyer, and one-time vo-ag instructor. Over his diverse career, he’s seen a lot of successful transfers and just as many train wrecks. Erbele is passionate about succession planning and has become a locally popular speaker on the topic. He also has some practical experience in the matter. He and his wife, Carol, are in the process of transferring ownership and management of their family ranch to their son, Tim, and daughter-in-law, Ronda.
• Start early if you hope to pass on the farm successfully.
• Talk about the future should start at the kitchen table, not at a lawyer’s desk.
• A foundation needs to be laid when your kids are young.
“The most important thing is that you have kids who want to farm and who have the skills to do it well,” Erbele says. “That’s where a successful transition really starts.”
His tips for passing on the farm to sons or daughters include:
• Start early, really early, when the kids are still young and following you around the farmyard. If you wait to start thinking about the transition or determining if your kids are interested in the farm until your kids are in college, or are adults, you’ve waited too long.
“Our grandson was about 5 when we gave him his first cow. Every morning we’d go out together and check to see if the cows were calving. His cow was the first, and he was bursting with pride. We let him help tag the calf. As we were walking back to the fence, he looked up at me and said, ‘So when are you going to start calving, Grandpa?’ I couldn’t have been prouder.”
• Don’t try to make a blue heeler out of a black Lab. “A blue heeler will never be a hunting dog, and a black Lab will never be a herder. The same thing can be said about kids,” Eberle says. “Some don’t have it in their genes to farm or ranch. That might be hard for you to accept. It might be hard for kids who want to come back to farm purely for financial reasons to accept, too.”
• Cultivate your kids’ interest in agriculture like you would cultivate a crop of wheat or soybeans. Plant the seed about farming and nurture it. Let your children do age-appropriate work. Give them more responsibility as they get older. Don’t pay them like hired hands. Treat them like management. Talk to them about the decisions that need to be made. Pay them in bushels or in calves. Let them market their production.
• Compliment positive efforts; criticize gently.
• Share your vision. Your children need to know that you are optimistic about the future and see a good life for them on the farm. Who would want to join you in an operation if you are constantly complaining?
• Be careful of the words you use. If you hope to pass on the ranch to your children, don’t say “I” and “me” or “I” and “mine.” Say “we” and “us” and “ours.” Don’t introduce your son at the sale barn or the grain elevator as “this is my boy.” Let people know he’s part of the operation.
• Grow your business. Your farm or ranch must be able to support another family if you hope to pass it on to one or several of your kids. You’ll need to grow the income while the kids are growing up.
• Begin talking at home about how you’ll pass on the farm one day. The conversation needs to start at the kitchen table, not at the lawyer’s desk.
• Be willing to sacrifice. If you expect to get top dollar for the land you sell or rent to your children, your children probably won’t succeed. They need a break to get started.
• Equal isn’t fair. The sweat equity contributed by ones who have stayed on the farm has to count for something when creating an estate plan.
RAY’S WAYS: Ray Erbele started talking to his kids early about taking over the farm, and always tried to treat them like managers, not hired hands. He’s seen many farm succession successes and train wrecks in his career.
This article published in the August, 2011 edition of DAKOTA FARMER.
All rights reserved. Copyright Farm Progress Cos. 2011.