A transition plan outlines the process of transferring an agricultural operation from one generation to the next and includes details regarding transfer of both management (succession plan) and assets (estate plan). 

Surveys and anecdotal evidence report low success rates for farm transitions and argue inadequate transfer plans or lack of a transfer plan explain the low success rates of agricultural operation survival, despite most producers’ desire to keep their farm or ranch in one piece and in the family. 

Transition planning difficulties

Transition planning is difficult for many reasons, both logistical (requires time and resources such as accounting and/or legal help) and psychological (brings up thoughts of mortality and often involves tough decisions and conversations); therefore, producers tend to delay planning altogether.  

We surveyed U.S. ranchers regarding plans to transition their ranch to the next generation and received a total of 148 responses, mostly from Texas (66.9%) producers. Survey participants shared information about their operational structure, family dynamics, and details of their ranch transition plans or roadblocks preventing them from developing a plan. Less than 40% of survey participants have a transition plan in place.  

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Chi-square tests for independence revealed relationships between some characteristics and the presence of a transition plan. Results indicate a positive relationship between operational structure and succession planning, i.e., producers who have put in time and effort to organize their operation beyond a sole proprietorship are more likely to have a succession plan. Results also indicate age and net worth each have a positive relationship with succession planning – we observed an increasing percentage of respondents with a succession plan as net worth increased until net worth reached $15,000,000.  

Government incentives?

Survey participants answered open-ended questions regarding their transition plans and roadblocks to planning – responses are summarized in Table 1. Operational longevity in agriculture depends on the ability of farms and ranches to survive from one generation to the next. Since evidence shows this process has proven difficult for producers, is there a role for the government to play in incentivizing the generational transfer of agricultural operations? 

Source: Southern Ag Today, a collaboration of economists from 13 Southern universities.