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As Farmers Retire, their Families Face Difficult Choices


Driving around his potato and barley farm in his silver Ford F-150 crammed with yellowing notebooks, Thad Elliott looks out on fields that have been in his family for over a century.

He didn’t want to be a farmer as a kid growing up here in the San Luis Valley, but after decades of planting and harvesting — first as his father’s partner, and then as the farm’s owner — he’s learned to appreciate the family business.

“I guess it’s just a way of life I’ve grown into,” he said, passing the field by the river, where this summer his family will throw him a 70th birthday party. “Working for yourself, not working for anyone else.”

So what’s the hardest part about retiring? The finances? The family conversations?

“All of the above,” he said. “Just doing it.”

Of all the challenges facing American agriculture — low commodity prices, President Donald Trump’s trade wars, climate change — the coming wave of farmer retirements gets relatively little media attention.

But farmland must be passed down to a new generation for agricultural communities to survive. And the last time the U.S. Department of Agriculture checked, in 2012, nearly a third of U.S. farm and ranch operators were over age 65.

Farm operators who don’t have children willing to take over often end up selling to developers or neighbors who may be near retirement themselves. When farmers do have a son or daughter ready to take the reins, poor financial planning, family infighting, or lack of communication can still leave descendants no choice but to sell the farm.

The challenge is particularly acute in Colorado, where in 2012 the average farmer was 59, a year older than the national average. From 2011 to 2018, the state lost nearly 7% of its farms and ranches and about 187,000 agricultural acres to other uses, according to federal estimates.

Between 1992 and 2012, almost 31 million acres of farm and ranch land have been taken out of production, according to American Farmland Trust, a nonprofit based in Washington, D.C. That’s an area the size of New York state.

“We’re at a pivot point,” said Colorado Agriculture Commissioner Kate Greenberg. If something isn’t done to keep farmers on the land, she said, “we’re going to continue losing at an incredible rate.”

To support family farms, her agency may expand a state program that dispatches mediators to help farmers address contentious legal issues. Her team has been meeting with farm groups to find out what other help the state could offer.

Transitioning a farm is more complicated than transitioning a typical business, said Todd Hagenbuch, a Colorado State University Extension agent who mediates succession planning discussions among farm families through a nonprofit program.

“It’s a family, it’s a business, it’s personalities, it’s history, it’s all wrapped into one big thing,” he said. “And that makes it exceptionally complex.”

ASSET-RICH, CASH-POOR

Colorado’s San Luis Valley is a high-altitude plain larger than Massachusetts. Ringed by mountain peaks, the valley is flat and dry, home to small towns, the occasional river marked by cottonwood trees, and mile after mile of irrigation pivot circles. Up here, the sun shines bright and harsh.

Emily Brown, Elliott’s daughter, grew up in the valley, feeding the family chickens and riding inner tubes down irrigation ditches when they filled with snowmelt in the spring. She moved away for college and work, then back to take a job running the county public health department and to be close to family after her first child was born.

Now Brown’s husband, Kyler, is working for her dad as a salaried employee, and the couple — both age 36 — are considering taking over the farm, which comprises a few hundred acres.

Elliott admits it would be easier to retire if he didn’t have potential successors.

“If I didn’t have family around, I could probably do it real easy — I could just rent [the farm] out,” he said. But renting out land often leads to selling off idled machinery, which his children likely couldn’t afford to replace later if they decide to take over the farm. “There’d be just no way to get back into it,” he said.

Perhaps the biggest challenge would-be farmers face is the high cost of land and equipment, compounded by farming’s uncertain and often low financial return.

“Land values, especially in Colorado, completely outpace any viable agricultural business model,” said Dan Waldvogle, former director of a nonprofit program called Colorado Land Link that matches farmers and ranchers without successors with young people in need of land. He now works as the membership coordinator for the Rocky Mountain Farmers Union.

Farmers can be wealthy on paper, owners of tractors that cost $200,000 and land worth millions, but still have very little money in the bank. And they can’t easily sell off their assets — to pay taxes or nursing home fees, for instance — without hurting the farm business.

So young people don’t just struggle to buy farms; they also need help from accountants, lawyers, and bankers to inherit them.

To avoid estate taxes, farm families need to wrap their assets in trusts, limited liability companies, and limited liability partnerships. They need mechanisms to allow a retiring farmer without a 401(k) to continue to draw income from the farm after his child takes over ownership. They might need livestock leases, conservation easements, or options to purchase.

Brown said she’s had trouble figuring out which tools would help her family. “It’s almost like you need a menu,” she said, standing outside the farm’s potato storage shed and spreading her arms in exasperation. “Here’s what you’ve got, here’s the 10 different options you have.”

Jenna Keller, a lawyer based in Craig, Colorado, who helps rural clients with estate and tax planning, said expert help may be getting harder to find.

“Those issues that are facing farmers and ranchers have reached such a level that they really need some specialized services,” she said. “They need an accountant who knows the difference between a replacement heifer and a breeding bull.”

But many rural tax and estate planning specialists also are retiring, Keller said. Her company has been taking over closing law practices in Colorado. “We’re trying to figure out how to keep the doors open on an office, so there’s at least someplace for people to go in a community to video conference with us,” she said.

THE FAMILY INHERITANCE

Estate and succession planning also requires dealing with family drama, from sibling fights to conflicts over whether Dad still gets to make management decisions in his retirement.

“Farmers and ranchers, historically, are not very communicative within their family talking about these things,” says Jeff Tranel, a Colorado State University Extension specialist who acts as a mediator and holds workshops on farm succession planning all over the state.

Sixth-generation farmer Elena Miller-ter Kuile says her grandmother was no exception. Her grandmother’s will, which split two family properties among five children, almost cost Elena’s father, Alan Miller, the farm he’d worked for decades.

Elena and Alan grow hay, oats, and barley and raise sheep on 400 dry, rocky acres near La Jara, a small town in the San Luis Valley. The farm has never been a big moneymaker, and both father and daughter sometimes take odd jobs to make ends meet.

Yet after Alan’s mother died in 2015, an appraiser said the farm was worth $1 million.

“We have the oldest water rights on the river,” Elena, 31, said of the valuation. “That’s really the bottom line.”

The will set off a bitter family fight. Alan inherited half the main farm, but he and Elena knew they couldn’t make a living on a smaller property – and they didn’t have the money to buy the rest of the land. They called in a mediator, but the family spent more time trading insults and airing grievances than coming up with a solution.

Eventually, the father-daughter team hired Keller, who helped them reach a settlement that allowed them to buy the rest of the farm. They paid for it by renting out a water right and putting the property under a conservation easement paid for by the Rio Grande Headwaters Land Trust — a designation that means the farm cannot be developed and will significantly reduce the value of the property.

Now Alan, 61, is facing the same dilemma his mother faced. Standing in the dusty doorway of Elena’s bungalow, sheep bleating in a field nearby, he mused over whether it was fair to bequeath one daughter a huge asset and leave his two other daughters very little. But if there’s one child taking over the farm, “then we have to support that steward,” he said.

Succession planning starts long before families begin drawing up legal documents, said Callie Hendrickson, who conducts trainings on family communication for the Colorado Farm Bureau. She tries to help participants address power dynamics and resentments that can fester over time.

The gruff farmers and ranchers who come to her workshops often discover they have the same problem, she said: how to deal with Dad. “How do you transition from the kid, who was there to do whatever Dad wanted, into a decision-maker and a manager, and eventually into making the decisions?”

Hendrickson said she’s worked with farmers who are 40 or 50 and still working for their grandpa.

Young people who buy or lease land from a stranger face similar tensions. Colorado Land Link, the program that pairs young farmers in need of land with older farmers in need of successors, has struggled partly because of high land prices, Waldvogle said.

But it’s also extremely difficult for farmers to give up day-to-day control over their land, he said. The Land Link program doesn’t have the resources to offer mediation or matchmaking services to ensure participants can work well together. “To probably no one’s surprise, we had a lot of epic failures with our matches,” he said.

Emily Brown said her husband, who’d rather run a horse or cattle ranch than grow potatoes, researched the Land Link program before they got involved in the family farm. But they decided it was unlikely to work for them. “We’ve both realized that maybe that works in a few situations,” she said, but for a lot of families, “it’s gotta be a really special relationship.”

Brown, her husband, mom and dad went to one of Tranel’s legacy planning workshops last fall. After Christmas, the whole clan, including Brown’s two sisters, headed to a local restaurant for a family meeting. Nothing was decided then and there.

“My mom and dad have had plenty of conversations, we’ve tried to talk to my dad … It’s a whole process,” said Brown. She and her husband aren’t certain they want the farm. And her dad sometimes seems torn about the long-term viability of the business, she said.

“I think my dad just knows that water is always an issue here, and might be getting harder,” Brown said. “And farming is hard.”

https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2019/…

(Note: Print or Digital Use Allowed. Please credit Stateline, an initiative of the Pew Charitable Trusts. For downloadable graphics, please visit www.pewtrusts.org/stateline)

Source: Sophie Quinton, Agriculture.com

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