Succession on the Farm: Working the Middle

SIGN UP NOW: CLICK HERE to sign up for the FarmLife email newsletter, and you’ll get instant access to the exclusive, FREE eBook download, “Guide to Succession Planning: Passing on the Farm,” with advice from top experts in both the U.S. and Canada.

Ryan Panbecker

Nine-year-old Ryan Panbecker is everywhere on the Iowa farm this warm October day.

He’s helping get tools out the back of the pickup or running through the stubble of just-harvested corn. If enthusiasm is any indication, Ryan appears destined to take over, but not for another decade or more down the road.

The trick is to bridge that time somehow by keeping the farm operating in the family while allowing Elroy, who is 69, to transition into something resembling an actual retirement. You see, Elroy’s son and Ryan’s father, Terry Panbecker, is the director of the precision agronomic division for Fort Dodge, Iowa-based New Cooperative. Terry plans to continue in that full-time role while devoting off-hours to the family farm 45 minutes away, near Pocahontas.

“Terry has a very good job,” Elroy says of his son, “and I can understand him staying with it. He adds wistfully, “But you know fathers always like to have their children following in their footsteps.”

In a macro sort of way, Terry has been following in his father’s footsteps. Terry worked in the software and precision technology divisions of two farm machinery companies (hint: one of them was AGCO) before taking the job with New Cooperative, in part, to stay close to the family farm.

Much of this know-how was brought to bear on the Panbecker farm in terms of precision technology. “To be fair, I’ve driven some of the technology changes on the farm, but Dad makes it all happen,” says Terry. Though their farm wouldn’t be thought of as large these days, the Panbeckers have been using and benefiting from a variety of precision ag tools, such as yield and planter monitoring, and variable-rate fertilizing.

Certainly, the high-tech comfort of modern machinery, along with precision farming aids, has made working more years less physically strenuous. Assistance from outside the family could also help the Panbeckers operate the farm and bridge the generations. That could, says Terry, either be an employee or a working financial partner of some type—to get the Panbeckers to the point where young Ryan, or his twin sister, Nicole, might be involved.

Already, 9-year-old Ryan does a few chores with Granddad.

There are no statistics as to how many farmers keep working to give heirs time to become adults or to acquire the means to buy them out. Still, while Terry’s situation does make the succession planning a bit more complicated, transition advice is much the same for the Panbeckers as other farmers. For instance, succession and estate planning experts recommend that goals for the operation be established that take the entire family into account. Everyone involved should list personal, family, business and retirement goals.

The planning discussion can’t happen early enough. “Give yourself the benefit of 10 years to make the transition,” says Joel Green, an attorney with St. Louis-based Aegis Professional Services, who has considerable experience helping agricultural businesses plan for generational succession. “We can do a lot in terms of estate planning with that kind of time frame,” he says.

Though he isn’t familiar specifically with the Panbeckers, attorney Hannon Ford often recommends the use of a living trust into which someone like Elroy Panbecker could place all his assets. Often, he notes, the size and complexity of the operation, as well as escalating land values, dictate even more advanced planning that may involve family limited partnerships or family limited liability companies.

“You use [a trust] for everything,” says Ford, who operates The Ford Law Office in Windom, Minn. “The trust exists and continues to exist even after Dad has passed away. It helps allow for the smooth transition of a business.”

Additionally, the rules set up in regard to the trust can allow for how business assets might be bought and sold, or how the trust might rent land to his son or grandchildren, or any outside party down the road. “There are rules for—if someone in the business becomes incapacitated—who makes decisions,” says Ford.

In the case of someone like the Panbeckers, where they are waiting to see if a grandchild might want to take over the operation, the creator of the living trust can require that the farm not be sold during the next 20 years, for instance. “This gives, say, the grandson time to grow up and know if he wants to farm or not.”

Additionally, the Panbeckers could use a limited liability company, or LLC, to own the assets of the farm—even within the living trust. The use of an LLC might allow Terry Panbecker to purchase shares of the operation over time rather than just when his father is no longer in the picture.

“He may not want his son to have to buy shares in the LLC 20 years from now at twice the price of today,” says Ford. “Really, the living trust, the LLC and buy-sell agreements are just different versions of contracts.”

In the meantime, Elroy plans to continue farming full time for at least the near term, while Terry holds down his “day job” and gladly works the farm whenever needed. In the not-so-distant future, however, Ryan and/or Nicole may take over the operation. Yet for now, they’re pretty content fetching tools, running through farm fields, learning the ropes on the farm that could one day be theirs, and generally getting to spend time with Dad and Granddad.

New Technology Ahead

Terry Panbecker has spent most of his career working with cooperatives and machinery companies on the evolution of precision farming tools as they relate to agronomic decisions. Given that expertise, FarmLife asked him, “What precision tools are ahead for the next five years?”

• Fertilizer and insecticide delivery “solutions” that work with the planter will continue to be developed.
• Data will continue to be more easily transferred between office and farm equipment with more connectivity solutions.
• Decision management tools and applications will become even better at assisting in real-time, taking into account various factors, such as weather, growing-degree units and the crop’s ability to use fertilizer.
• A variety of placement tools will help allow multiple hybrids to be planted in a single pass. That, says Terry, “will prove to be a good return on investment once more research is available to drive recommendations.”