Between now and 2048, about $124 trillion is expected to exchange hands from older to younger generations in the U.S., according to Cerulli Associates, a Boston-based market research firm.
For perspective, that dollar amount is approximately five times the size of the 2023 U.S. Gross Domestic Product (GDP), which totaled $27.72 trillion.
How will farmers fit into what many people are calling the “Great Wealth Exchange” over the next two decades? Much of it is specific to land, according to the American Farmland Trust (AFT). It predicts 300 million acres of U.S. agricultural land will change hands in the next 20 years.
Based on $5,000 an acre for farm ground, Paul Neiffer, the Farm CPA, estimates that would be a transfer of between $1.5 trillion and $2 trillion in land from older farmers to younger generations.
“If you throw in rangeland, that’s another trillion, so $3 to $4 trillion at most is where I think we’re at,” Neiffer says.
The Reason Succession Often Fails
A common issue is that while 69% of farmers plan to transfer their operation to a younger family member, only 23% have a plan, according to AgAmerica Lending LLC.
But the No. 1 issue that trips up people in the succession planning process is most people – farmers included – focus more on the mechanics involved in transferring assets than on keeping their family relationships intact.
That’s according to Amy Castoro, CEO and president of The Williams Group, a family coaching and consulting organization. Her firm does relationship planning to help family members make sure they’re still speaking to each other after the wealth transfers.
Many times, she says, the friction in the transfer of wealth has little to do with money and material goods and a whole lot more to do with whether the family members involved felt loved.
A Formula For Success
The Williams Group did a 20-year field study and from that developed a formula for how people need to focus their time and energy in the succession process.
The company recommends spending:
60% of your time on building family trust and developing good communication practices;
25% preparing your heirs to take over the operation, laying the business and fiscal groundwork for the farm to continue under their leadership;
10% of your time getting on the same page about your family’s values and having a family mission;
5% of your time on the estate planning mechanics, the nuts and bolts of how the assets will transfer.
In addition, The Williams Group advises that you work with your heirs to:
- Strike a balance between control and collaboration.
- Embrace the next generation’s perspectives.
- Bolster intergenerational solidarity.
- Embed high-trust behaviors.
- Co-design standards for readiness.
Start The Plan Sooner, Not Later
If you want to see your farm succeed with the next generation of family members, make sure you have the right structure in place – and set it up sooner than later. Don’t put it off, Neiffer advises.
Once you have a plan in place, you have a tool you can modify to fit what your family and farm need over time.
“Having a plan in place can help alleviate stress, even if things change down the road,” Neiffer says. “Keep in mind that farming is a dynamic business and your plan needs to be, too.”
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