Finances was the third week’s topic of the “Leaving a Lasting Legacy” series. A statistic was shared that surprised me. Did you know that only 27% of land is inherited or gifted? I was surprised this number wasn’t higher. It was suggested that with cost of living, nursing homes, etc., it may not be feasible for owners to “gift” land when they’re in their sunset years (meaning, the final years of a person’s life that may include retirement or “slowing down”). A UNL survey in 2017 asked farmers why they were retiring later: 62% said they can’t afford to retire. That’s a sad statistic as well.

Regarding the other ways land is obtained, 4% is purchased at an auction, 18% is purchased from a relative, with 50% being purchased from a non-relative. So, the question for those hoping to farm in the future becomes, How are you preparing yourselves to financially buy land…including buying out siblings, etc.?

For the owner generation, “sunsetting” means to step back and support without necessarily stepping away. It’s important to know your ultimate goal for the farm/ranch for the future. If you desire succession of the farm/ranch, documents need to be in writing and everyone on your team needs to know your goals and what the documents say. Your family also needs to know.

Your “team” can include people like a lawyer, tax professional, banker, financial planner, and others such as a facilitator/mediator. The key: You Know them, Like them, Trust them. These professionals should provide options but not tell you what to do. Your situation is unique. Not every tool in the toolbox is the right tool for you and your situation. Of importance, the term “financial advisor” is not regulated. They recommended to look for a designation called “Certified Financial Planner” (CFP).

Transitioning is a balancing act. The owner generation can’t bring the next generation into the operation at financial jeopardization of the owners. An income statement (profit-loss) statement is a way to know the profitability of the farm and the ability to support two families or not. This is not what is in the bank account. An income statement shows the net farm income, which is the profitability of the business.

We also walked through balance sheets (also known as net worth statements). Balance sheets don’t show profitability; they show what we OWN (assets) or OWE (liabilities) and are a snapshot of the situation for a moment in time. While this may not be new to some, I appreciated a visual activity we did where we split assets and liabilities into quadrants that included current (the current year) or fixed (more than one year). I think for many not involved with the day-to-day operations of a farm or business, it’s hard to visualize the large numbers being mentioned. I have an example photo of this more visual way of looking at a balance sheet on my blog at jenreesources.com.

On-Farm Research Update will be held on February 18, 2025 at the Holthus Convention Center in York. It’s one of my favorite meetings of the year to hear from the farmers themselves about why they tried the studies they did and what they learned. Often the results will show no differences compared to the check treatment, which can frustrate people. However, that’s important information to test it on smaller acres first before investing a lot of money on larger acres. We did have some studies with promising results as well, though. If you’re interested in attending, please call (402) 362-5508 to pre-register as we need RSVP for lunch count.