Ep. 90 Planning for Tomorrow: Farm Transition Strategies with David Marrison
Main Topics Covered
- Farm Transition Planning: Differentiation between farm succession and transition planning, emphasizing a comprehensive approach that includes succession, taxes, estate transfer, and business organization.
- Key Components of a Transition Plan: Business analysis, succession planning, family communication, contingency plans, retirement planning, and estate planning.
- Communication Challenges: Importance of family communication and strategies for initiating difficult conversations about farm transitions.
- Timeline for Planning: Recommended starting the transition planning process 7-10 years before the senior generation plans to retire.
- Resources and Workshops: Ohio State University offers workshops and resources to assist with farm transition planning, including online courses and regional workshops.
- Books and Resources: Recommendations include "Crucial Conversations" for handling high-stakes discussions and Elaine Fra's "In-Law Factors" for navigating family dynamics in farm transitions.
- Transcription
Speaker 1 (00:08):Welcome to AgCredit Said It your go-to podcast for insights on farm finance and maximizing your return on investment. Join us as we talk to industry leaders, financial experts, and area farmers, bringing you skillful advice and strategies to grow your farm's financial future AG credit setting where farm finance goes beyond the balance sheet.
Phil Young (00:39):Welcome back to another episode of AgCredit Said It, where we take you beyond the balance sheet of farm finance. I'm your host, Phil Young, and today we're talking with David Marrison, a field specialist in farm management for the Ohio State University. We're diving into a very important topic, and that's farm transition planning, so welcome, David.
David Marrison (00:57):Thanks, Phil. Glad to be here.
Phil Young (00:59):Yeah. To start off, can you tell us a little about your position at Ohio State and what inspired you to do this focus area of agriculture?
David Marrison (01:07):Sure. I've been working as a field specialist in farm management since November of 2022, so that looks like a small time period. However, before that time, since 1997, I've worked as a county extension educator in three counties in Ohio, Ashtabula, Trumbull, and lastly in Coshocton County, and during that time, got to work with lots of farm families, got to see the firsthand struggles that our farm families have as they transition from one generation to the next. So it was kind of just an interest. I saw an explosion in farm transition on our personal farm when my grandpa passed away, so I started to explore and to watch transitions more and have been teaching in this area close to two decades now. So it's just a passion area of mine. I would say Phil, I'm probably the guy that talks about death and taxes. The two things we don't want to talk about, the two certainties of life, death, and taxes. That's what I get to talk about in my position.
Phil Young (02:10):Yeah. So is this a new position in Ohio State where you're kind of having this focus or has this been a position with your specialization for a while?
David Marrison (02:24):Right, great question. Ohio State used to have five district farm management specialist many years ago, and through some retirements, through some budget reductions, those were phased out in 2022. Ohio State had a recommitment to some of our farm management outreach. The Farm Financial Management and Policy Institute was begun, and three folks were hired out of the county level to step into these field specialist positions in farm management. So just seeing the great need for farm management education, whether that's on finances, ingrained marketing, tax management, farm transition management, it was just saw the need of Ohio State to reinvigorate our efforts in farm management education for Ohio producers.
Phil Young (03:09):Well, we kind of hear the term farm succession planning, and then we hear the term farm transition planning. I, are those interchangeable things? Is there a difference there? Are we using it wrong or right? Can you walk us down maybe if those are the same or different?
David Marrison (03:27):Sure. And when you hear farm succession, you hear farm transition, you hear estate planning, and I think for all of us, those terms may mean something differently, but I'll define what Ohio State as we look at it. We use the word transition planning because transition planning in our mind includes succession planning as well as takes a more comprehensive look at taxes, estate transfer, the legal structures, business organization structure. Farm succession would be more about the leadership and the management transfer from one generation to the next generation. So developing that next manager, the succession plan for leadership transition plan. Maybe you broaden that definition a little bit more to include estate planning taxes and a wider kind of look. But you'll hear a lot of people say transition planning, succession planning. What we think is we just need to talk about planning for the future of your farm, and that's kind of where we leave it.
Phil Young (04:31):Yeah, yeah, almost. Yeah, like ownership versus leadership or is kind what I hear you saying. Yeah, who owns it versus maybe who leads it or who manages it maybe. Is that a good way
David Marrison (04:39):To say? And even retirement planning, we'll dive into that. Risk management will tie into that financial management, which I know I credit loves the financial management side of that. That is included into that transition planning thing as well.
Phil Young (04:56):Okay, nice. Yeah. What are some key components of me? What are key components of a successful farm transition plan?
David Marrison (05:05):Yeah, in the farm transition plan, it could be a big monster of a plan. When you put it together, we like to start by looking at the legacy. So we would look at more of a business analysis approach. Where is the business currently? Where has the business been? And then also looking at the vision and the mission as where is the business going to go into the future? So you would have that business analysis part of the plan, but then the succession, we define that term, right? How do you put a plan together to talk about developing the skills of the next management, thinking about future leadership, also thinking about the future organizational structure of that farm. Then I think the most important part of a transition plan is what's our family communication plan? How are we going to communicate? What are the that we can put in place to communicate not only as a family, but also as business members in a farm business?
(06:05):Then another part of a transition plan would include your, what I would say the, oh no, that happened, plan, the contingency plans, the risk mitigation. This could include the elephants in the room. It could be thinking about everything that could go wrong and how are you're going to overcome those issues in the future. I always say it's easier to plan for difficult events before they become difficult. So maybe you have a plan, some best operating procedures when the proverbial crap hits the fan. I guess there's no good way to say that, right? But to understand what would you do if things just go sideways? And then in the whole transition plan, talk about retirement, and then the real sexy part of the transition plan is that pure estate plan. So that's getting down to the nitty gritty, how we transfer ownership. How do we use the estate tools that are our disposal with our qualified ag attorneys about crafting that legal plan to make sure that everything that we're doing is legal and that's going to be able to go from generation to generation. Lots of pieces and parts that go are lots of pieces to the puzzle that go into that transition plan for sure.
Phil Young (07:22):How do those conversations usually go? Are they usually pretty smooth? Are they rocky? Is it a little bit of a mixture between when you start having these conversations and digging into the weeds? I mean, do most people come a little bit prepared with what they're thinking or is they have a, I have no idea. How does that guidance go from you?
David Marrison (07:44):Well, I would love to say all communications about the future of our farms is smooth and easy, but I'm experienced enough to know that a lot of times where we struggle in families is in our communication patterns. It's easy to communicate about what the weather's doing today, what it's done yesterday, what it might look like for the fall harvest, but it's really hard to start to communicate when we get into planning for the future. But also we have family dynamics that are in play. We have family history that's in play, so it may be something that happened 10 years ago that's going to show up to make us a little dysfunctional as we move through the process. So I would say the hardest part about this is about actually talking about the wants, desires, and dreams of every generation as they look at that farm business.
Phil Young (08:42):Do you try to have one-on-one conversations first with everybody, or do you just say, Hey, we're just going to meet as a big group, or what's the best way to do that?
David Marrison (08:49):Okay, I'll give you my best attorney answer, and it's going to say it depends.
Phil Young (08:53):Yeah,
David Marrison (08:53):Classic. So the classic answer depends because it does depends. We have the Ohio Farm Resolution Services, which we just started two years ago. We got the funding from the USDA to be, for most states, they would call that a mediation services, but we here in Ohio called the Ohio Farm Resolution Services. There's five of us that are qualified mediators through the Supreme Court. However, we like to look at opportunities to help people come together to talk about sensitive issues and kind of work through that. So when you ask about how do we do that? Well, that depends on some families. It starts with a big family meeting. Other families, it may be a conversation between one of us from our team and the senior generation to get the ball rolling, and then we do individual kind of exploration with each member and then come back together. Or it could look as a mix of all that. So it all depends on the family, family dynamics, family history, some of their goals and objectives that they have of why we're coming in to help. But usually in the farm Resolution services, we're coming in to some pretty sensitive and some, I would say, situations that have high crucial conversations that need to be had. So we try to tailor make that to the family and based on the dynamics that we see
Phil Young (10:20):And how far in advance should a family start talking about their transition plan of their farm.
David Marrison (10:28):And some people will say, oh, it should be immediately on our farm. We only had seven weeks. My dad was diagnosed with pancreatic cancer and we were a dairy farm in northeast Ohio. So that became a very short timeline, what we would recommend, seven to 10 years. So seven to 10 years before the senior generation. If you have to ideally look like, when would you like to transition out to retirement or slow down, pull yourself back from the farm, look at a seven to 10 year window and bring it back. So maybe the goal is social security benefits. I'm going to collect them at 67. If that's the case, then that's my goal. So it's different for every farmer, but if it's say 67, then you work backwards. If they're at the age of 57, that's when they should start the plan, because that transition of management takes time. There's a lot of pieces to the puzzle. Even the estate plan could take up to a couple years to pull together all the documentation and everything that you need. It doesn't happen overnight. So giving yourself a lot of time to methodically, to slowly work through the process is the best. Now, can you do it in seven weeks? Pretty hard to do, but you can if you're forced to because of some type of life event that happens. But we would prefer that five to 10 year, seven to 10 year kind of approach.
Phil Young (11:53):From what I've seen, it does take by the time you start the conversation, months, years to actually get there, once you start getting paperwork around. And yep. I guess, what steps should a farmer take to prepare for the transition their farm? What does that look like? What's step one?
David Marrison (12:13):Step one is you got to take the first step out the door. You got to take the first step to start to plan, and that's just the first step as a farm family, as a farm business, to make a commitment, a commitment that we're going to put a plan together for the future. So that's step one. You have to start with that, and then that rolls into putting a lot of your financial affairs in order, but it's starting to help that communication, starting that conversation here at Ohio State, we would say the best way to start is you enroll into one of our workshops or from other workshops that you might take, but enroll into a workshop, dive into the resources that you have, and then start to establish those goals for a timeline on how you want to put your transition plan together.
Phil Young (13:04):Would you say you see a lot of the people that initiate this conversation are spearheading it? Is it the older generation spearheading it, or maybe the generation that's taken over spearheads the conversation? What's the norm, I guess? I guess there's no wrong answer, but just curious. Yeah.
David Marrison (13:21):Well, what is the norm? Where should the discussion start? Absolutely. It should start with the senior generation. That's where it should start. The senior generation as they're thinking about the future, where does it usually start? It usually starts from the junior generation, the succeeding generation, and mainly it's about thinking about their stability, about their future, wanting to know what the plan is going to be going forward. You can imagine someone young who's in the business, they're thinking about what's going to happen with this farm. In the past, many farm families have been very secretive. You'll find out when the will is red or you'll find out later, don't worry kid, this will be yours someday. So that the succeeding generation are what I would refer to as the junior generation, which could be two generations, could be technically that junior generation they're trying to get a handle on. Think of the risk exposure that they'll have in the future depending on what is in the estate plan of the senior generation. Will they be able to continue the farm? Is there a plan in place? What is the plan in place? And basically it comes back to the security of what they're doing on the farm. They want to know that security is there, so the junior generation will kind of push it, but who needs to drive the process? It's absolutely the senior generation needs to drive that process.
Phil Young (14:51):Do you have any tips for if you have an older generation, the older generation isn't really in the mindset to even start those conversations, but really should, and the younger generation is kind of pushing it or is nervous to bring it up to the older generation? Any pro tips there on how to navigate that conversation or push that conversation forward?
David Marrison (15:15):Yeah, you're asking the tough question there, Phil, about how do you have that conversation without upsetting the senior generation of why you need to know? And we would say in any crucial conversation, the crucial conversation has to come from the sense of where you sit. So for the junior generation, part of this is saying, Hey, mom, hey dad. This is what I'm afraid of. This is what I'm concerned about in the future. For instance, maybe it's a young person that's saying, Hey, there's seven of us kids. I'm the one that's back here on the farm. I'm farming with you. So the fear there would be is the fear 20, 30 years down the road, the fear that person may be is, how much money am I going to have to have allocated or set aside if this estate is split equally between the seven of us children?
(16:13):So the difference between equal and fair, that's tough. So the fear of that younger generation is, am I going to be able to continue to farm in the future if I have to buy out my six siblings in that process? So that conversation with mom and dad could look like, mom, dad, I'm trying to plan out my future. Can you help me understand what the future estate plan looks like? Because I have to develop my plan to be able to make sure that I'm able to continue this farm after you're no longer here. But again, it's that depends. Thing comes up because every family and every person's reaction to being question about their estate plan is going to be a little bit different. So really expressing what your fears, your concerns are, and for the younger generation, part of that is to have a sense of humility when you're approaching and have a respect for the legacy of the senior farm, the senior generation as they have put their plan, hopefully put their plan together, but it's just approaching them from these are the concerns that I have. Can you help me understand what's going to happen to the farm in the future? Tough conversations for sure.
Phil Young (17:33):Any books or anything you'd recommend. And there's a book called Crucial Conversations. I don't know if you've read that one or that you keep saying that phrase, and I haven't read it, I've seen summaries on it. But are there books that help maybe people navigate how to have those conversations that you'd recommend
David Marrison (17:52):And the crucial conversations, those conversations that there's high stakes, there's high emotion around those conversations, which in farm transition, high stakes, high conversations, the book that you're referring to, Phil, crucial Conversations spot on. One of the best resources for folks that are looking to have those sensitive high stakes conversations. It's a great book. It's in our workshops. We use the crucial conversations, the methodology, talking about how we react as persons, how each of us individually reacts to high stress conversations, what naturally our tendencies will be in those conversations, and then how do we overcome just our natural tendencies when conversations are tough. So Crucial Conversations is a great book to start with.
Phil Young (18:43):Any others you'd recommend on any other topic?
David Marrison (18:47):Well, there's a book called Elaine Fra, who, she's a farm coach from Canada, actually. She was down here in Ohio this past March, teaching at our East Ohio Women in Ag Conference. Elaine is one of the premier coaches when it comes to farm coaching across the world when it comes to coaching people through the transition process. She has a book called In-Law Factors. So the in-Law factors is fascinating, and she has a couple other resources, but the in-law factors love because a lot of the stress when it comes into a farm situation could be through the eyes of an in-law. So whether that's uncle in-law, it could be a father-in-law, son-in-law, daughter-in-law, you name it. She has a great book about how do you have conversations with all the different players that may be part of that farm business. So that's an excellent read as well.
Phil Young (19:45):Any other tips you have or stuff we haven't talked about you feel like is maybe needed to bring up
David Marrison (19:50):For the transition? The big thing is to establish a plan. We are really good in farming of our annual plans, the annual cycle of what we do in the fields or what we do with our livestock, that annual plan. So the most important part about this, this is strategic planning, so it's really thinking about the future. So setting a plan, and then part of this is having set times for those communication checks. And we are a big advocate of family business meetings. So this could be a family business meeting that you hold once a month and you're going to make a commitment to it, a strong commitment to it, that you're going to meet once a month and make assignments and go through strategically how you're going to put this transition plan together because it's going to take some time. So you almost have to make it part just as it would be as you're out checking and doing your scouting and your corn and your soybeans, you're doing the same thing with strategic planning, but you're setting that timetable up to where you're going to sit down and then start to methodically work through putting a plan together for the future and be willing to communicate.
(20:59):The communication part of this is the toughest.
Phil Young (21:02):I work with farmers, and sometimes what happens is you have a conversation about it and then all of a sudden six months goes by and nothing's happened, and there was no action steps taken from that first conversation, and then you bring it up again and that no action steps are taken, and then another three months goes by. So I like the commitment of, Hey, every month there's going to be a plan. You're going to meet, you're going to meet, what was the plan last month? Let's move the ball forward to get something done. So I like
David Marrison (21:30):That. Invariably, I'll have someone call and say, Hey, I've been thinking about what you said at a workshop. And I'll say, oh, great. What workshop were you at? And they'll describe the workshop that they were at, and it was held 10 years ago,
(21:43):So they've been thinking about it for 10 years, but now a cousin, a fellow farmer, there was a triggering event that happened in the community and now it says, I need to get this underway and think about that. So yeah, if you don't put a timetable to it, then it's so easy to get distracted by the day-to-day operations. So many things to do in a farm operation day to day to day. So the strategic planning that we do is easily shoved to the bottom of the list because we were putting out the fires, the day-to-day fires that's happening on the farm. So you have to make a strong, strong commitment. I had a farmer tell me just this year, and I said I was setting up an appointment and I said, well, if I know this is during spring planting season, if something comes up that the weather is good and you need to be in the field, we can reschedule our meeting. And he said, no, David, this is even more important than a day of good weather of planting in the field. If we set this meeting on this day with the family, we will stick to this meeting regardless of what's going on with the weather that day, which is a great testament to the importance of this planning that you're doing. So I applaud him for saying that.
Phil Young (23:07):Well, good. I think you have had some really good thoughts here. Any lasting things you wanted to share before we wrap up?
David Marrison (23:15):Oh, if you are looking for the resources, Ohio State University, our farm management team, we have resources at farmoffice.osu.edu. It's a website there. You can see we have lots of bulletins put together, especially on the estate planning side, whether that's the different legal things, whether that's the tax management business structures, nursing home dilemma, all the things, those discussions that you might roll into. We have a suite of resources there for people to use at farmoffice.osu.edu. Also know that we teach regional workshops across the state every year, six hour workshops in farm transition and those roll around the state. We try to move around those states. We even do one via Zoom in 2026. It'll be the first four Mondays of March. We do an evening you can watch from the comfort of your home. And as we get into Farm Science Review, there'll be announcement coming out of, we'll have a new Scarlet Canvas course that's an online course. So you can take a course in Farm transition planning at the time, and a place that's convenient for you to do will be on Robert Moore, one of our OSU Ag attorneys, and I have put this course together. It's going to be released in September. And again, you can sign up and take the course worksheets, go through the material as a family in the comfort of your farm office right there at home.
Phil Young (24:47):David, hey, thank you for joining us and really appreciate all the hard work you do for Ohio Farm Families. Really appreciate it.
David Marrison (24:53):My pleasure. Thanks for having me here.
Phil Young (24:55):Yeah and thank you to our listeners for tuning into another episode of AgCredit Said it and we will see you next time. Thanks guys.
Speaker 1 (25:10):Thank you for listening to AgCredit Said It. Be sure to subscribe in your favorite podcast app or join us through our website at AgCredit.net so you never miss an episode.