Succession planning can be a complicated exercise for every small business. For a family agricultural business, the challenge is more acute, as the business, the family, and an entire way of life are often closely entwined.

And yet, it is still a business. Succession planning in agriculture is complex, but also important. It starts with a plan and a team approach to considering all options. Flexibility in the face of changing laws and family interests matters, too.

Get a Plan

Clay Henry, senior vice president of wealth strategies for PNC Bank, has worked with many families making long-term plans for their businesses. "People are not forthright about articulating what they want to happen," he says. "The plan has to be clear, and that comes from putting it into writing."

“A good plan is flexible,” Henry says, especially as situations change over time. In recent months, he has been helping clients update their plans following the new tax laws.

“Part of the plan includes making sure that those taking over the business understand it,” says Lowry Perry, senior vice president of PNC's agricultural banking business. The children may know a great deal about the daily and seasonal operational needs, but they may have been shielded from financial management and investment decision-making. "The child returning to the farm usually grew up on the farm," he says, "but training is still needed. Successors need to understand the business if they are to succeed when they take over."

Above all else, any plan is better than no plan at all. Perry has seen cases where a succession or estate plan has not been recorded, despite the complexity of multiple family heirs. As the typical farm is land-rich and cash-poor, it may have to be liquidated to settle the estate if there is no plan in place.

Working Through Family Issues

Many of the agricultural businesses are family businesses, but sometimes family members don’t want the same involvement. And that adds a layer of complexity that other businesses — and other families — do not have.

"Fair doesn't always mean equal," Henry says. For example, if one child is heavily involved in the business, it may be fairer for that child to receive a larger share in it than the other siblings do. This is where communicating a plan becomes important.

In some cases, there is no family heir — at least not one interested in taking over the business. Perry emphasized that a successful succession plan does not always require a relative taking over management of the farm. In one case, a client identified a neighboring farm owner, and then helped work out a partnership and transition plan. Other clients have chosen to sell off equipment and lease out their land to other farmers, keeping it in the family in the event that a new generation develops an interest in agriculture.

The Business Team Supports the Family Business

Henry says that his wealth management team works closely with agricultural bankers and estate-planning attorneys to come up with plans that support the business and the family into the next generation. Life insurance or an investment portfolio may allow a farmer to leave assets to children who will not be taking over the farm. A phased ownership plan can help the farming heirs take over larger shares of ownership and decision-making over a period of years.

"Farmers have a pretty good idea of what their land is worth, but they don't understand how to monetize that asset," Perry says. Local zoning may also complicate plans for farmland, where conservation or farmland designations may actually prohibit the land to be used for anything other than farming. Speaking with local officials or real estate experts early may shape estate planning significantly.

In some cases, the business in question does not have a lot of market value, or, local zoning limits future land use. Knowing that ahead of time can help the owners make changes to increase the value or sell the farm.

Succession planning can be complicated, but the key is to start early and to engage key financial advisors and stakeholders.

PNC can help to provide financial guidance to businesses at all life stages. To find our more, contact your local banker or visit