Transfer & Succession

What is the difference between farm transfer & farm succession?

Farm transfer and succession both refer to the process of handing over control, ownership and/or management of the farm business to a new generation.     

Farm transfers usually refer to a sale between one party and another. They can be through a simple direct sale or some kind of financing arrangement such as a ‘vendor take back mortgage’, or a shared partnership. They are usually relatively short in their duration and usually require the new farmer to have some capacity to be able to secure the necessary financing.

Farm succession is more commonly used in the passing of a business within a family, and usually implies a longer more intricate process that includes a business transfer, as well as knowledge and support. Farm succession does not necessarily involve family members, but it does require a willingness to enter into a trusting and mutually beneficial arrangement with the farm land and business transfer taking place over time.

Farm businesses are most often tied to the productive land and the place where the farmer lives. This means that transfers of succession arrangements can often involve a complex situation where all aspects need to be evaluated from financial, legal, taxation, and personal lifestyle perspectives. Current and speculative farmland prices are also not always based on the actual productive value of the land or business. These prices can often be out of reach for new, especially young farmers. At the same time many farm business have leveraged the value of their land in order to operate their business.

Slower succession timelines and creative farm transfer arrangements can offer retiring farmers and new entrants a variety of ways to address the value of the business and the underlying farmland, as well as the complexity of living arrangements. Arrangements such as lease-to-own, share cropping, equity building, joint partnerships, and transfers that reduce capital gains taxes are some of the many strategies that can be adopted. But they all involve frank conversations with all parties involved, trusting relationships and clear exit strategies if the arrangement is not working. We encourage you to talk to local advisors, search our resource data base or take one of our webinars to explore your options.

Succession and transfer planning is an important consideration in a farm businesses as they allow the landowner and their families to plan for change and the future of their farm as they age. It also offers farmers an opportunity to build a stewardship legacy and to pass on their knowledge, experience along with practical assets and production land to the next generation.

For more information, search through our succession and transfer resources in our Resource Database