Lack of communication is at the top of a list of several challenges facing families as they look into the future and work toward the passing of the family farm or ranch to the next generation. Oklahoma State University Department of Agricultural Economics Professor Dr. Shannon Ferrell says research at OSU is showing that fewer than 30 percent of farms and ranches are surviving intact in the first generation of transfer and even some estimates show that number is closer to 10 -20 percent. If you look at multiple generations, the numbers shrink even more to 12 percent and three percent.
Radio Oklahoma Network Farm Director Ron Hays talked with Dr. Ferrell about transition planning as he prepared to make a presentation earlier this month at Agrifest in Enid. Click or tap on the LISTEN BAR below to listen to the full interview.
In evaluating the farms and ranches that did not pass successfully from one generation to the next, Ferrell says that several common threads were that there wasn’t enough of an estate plan in place, the farm may have been undercapitalized to support multiple family members and there wasn’t any communication between the generations on how the transition will take place. He adds that in many cases individuals were thrust into roles they were not prepared for as the estate plan was executed. To counter these obstacles to success, Ferrell believes that carefully planning well before the transfer happens provides the family a less stressful gameplan of generational transfer.
Estate taxes are often blamed when a family farm has to be liquidated, but the tax landscape has improved in recent years. While we don’t know the tax exemption levels for 2015, Ferrell said in 2014 Americans could pass $5.34 million of property, tax free. That was much better than a couple years ago when levels were at a million dollars or less. So for most people they will not have to do a lot of maneuvering to avoid the tax liabilities. Ferrell said that allows greater focus to be placed on how you would like to see the operation work in the hands of the next generation.
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