Among family farms and agribusinesses, inter-generational transition is nearly always a hot topic. However, at a recent banking school, participants were asked how many of their banks had a written transition plan for the business. Surprisingly, less than 20 percent raised their hand. Perhaps business transition is viewed as a daunting challenge regardless of the industry. I often hear members of the younger generation comment that they cannot convince the senior generation to engage in the transition process. Just as often, I have witnessed the senior generation’s avoidance and objections towards the topic. It may be worthwhile to examine the transition process in more depth to address some of the underlying resistance.

While inter-generational transfer can be a challenging process, a recent quote from an older producer may best show the heart of the issue. He asks, “How do parents preserve a reverence for the sacrifice they and previous generations have made? Many of the older generation keep hold of the purse strings as a way to feel wanted and needed. Feeling pushed out, we want to maintain some control over the business and legacy for which we have worked so hard.” Regardless of right or wrong, these types of sentiments need to be addressed for the long-term health and wealth of both the family and business.

Actually, the best way for members of the senior generation to feel needed and wanted is for them to actually be needed and wanted. In other words, designing and defining a specific role for members of the senior generation would fulfill their desire to stay involved and meet the business’ need for skilled experience. This might entail asking elder family members to outline in writing their roles and responsibilities over a five- or 10-year phase-out period. This document might include details such as where they will live and what money will be used for living needs or capital withdrawals. Factors such as long-term healthcare and insurance should be discussed. After a living budget is completed, determine the source of income for each item. Of course, whether it is Social Security, off-farm revenue or income from a farm sale or lease, the sources of income must cover the expenses. As an aside, do not forget the impact of inflation. It could deplete your resources, particularly if you are earning less than the rate of inflation. Each of these are important questions to address before anyone can discuss splitting assets, equity and other items commonly found in an estate plan.

Often, a successful inter-generational transition process requires an outside facilitator or neutral party. In fact, investment in a third-party facilitator may be just as valuable as the resulting transition plan. Transitional issues can quickly become emotional or complicated. A facilitator can act as a conduit between parties and offer candid assessment of the skills, roles and responsibilities of each. In addition, a facilitator familiar with inter-generational transition can more easily interject reason, accountability, specificity and deadlines, all elements necessary for a successful transition.

Returning to the older producer’s comment, a family business is a way of life for some and for others, their prized legacy. Without a specific role, members of the older generation can become bitter, depressed or feel worthless. Further, in the absence of a defined role, many of the older generation will create tasks or ways to participate that may not be ideal, which, again, undermines their self-worth and business productivity. True, some individuals do retire from the business and never look back. However, for most, change is hard and a systematic process can greatly increase the chances of a successful transition for both generations as well as the business.