Abstract
Farm transition planning continues to be a significant challenge for U.S. agricultural owner/producers. Past and ongoing research points to an aging farm population with little or no planning to transition farms to succeeding farming family members, despite documented goals of continued family ownership and operation. This study developed and analyzed alternative farm asset transition strategies using a representative farm for Oklahoma. The simulations considered equity issues, family living requirements, and cash flow pre- and post-transition. Strategies analyzed considered off-farm investments and life insurance tools to even bequests between an on-farm and an off-farm heir, and also modeled splitting inheritance into an operating entity that owns machinery and other operating assets and a landholding entity that leases real estate to the on-farm heir. The simulations assumed a 20-year transition period. Results indicate that early planning is essential for success. In addition, the use of life insurance tools and/or the implementation of equitable, but unequal treatment of heirs improve the likelihood of successful farm transition between generations.
Recommended Citation
Reed, Garret; Ferrell, Shannon; DeVuyst, Eric A.; and Jones, Rodney
(2021)
"A Model of Farm Transition Planning for the U.S. Plains,"
Journal of Applied Farm Economics: Vol. 4
:
Iss.
1,
Article 6.
DOI: 10.7771/2331-9151.1062
Available at:
https://docs.lib.purdue.edu/jafe/vol4/iss1/6