Family Transitions Are Never EasyKyle Partain, Sheep Industry News Editor
Producers faced with transitioning control of the family sheep operation from one generation to the next need to realize that the process can be a difficult one involving lots of emotion and financial pitfalls on both sides.
Even for an older generation ready to settle into retirement, actually handing over control of the day-to-day operations isn’t easy, according to veteran producer Spencer Rule of Colorado. He represented the older generation in a discussion on transition at the annual Howard Wyman Sheep Industry Leadership School in Denver at the end of June.
“Your dad might have said he was ready to retire, but a lot of guys aren’t. Even some of the guys who say they are ready, just aren’t,” Rule said in reference to Ryan Indart of California, who took over his family’s sheep and farming operations in recent years. “I saw the transition from my grandfather to my father, from my father to me and now from me to my kids. I don’t care who you are, it’s never easy to let go.”
Indart was joined by Cameron Krebs of Oregon representing the younger generation during the panel discussion. In both cases, keeping ranch operations in the family’s name meant that one sibling had to step forward and assume control. While others in the family still have input during regular meetings, Indart and Krebs took on leadership roles within their respective operations.
“I’m a fourth-generation Oregon rancher, and I hope to pass that land on to a fifth generation someday,” said Krebs, who is the son of ASI Past President Clint Krebs. “But for me to come back to the ranch and make a living with it, it had to be a situation where I was in control. The ranch just isn’t big enough for everyone to make a living off of it.”
Included in his presentation were a dozen questions/considerations that members of the younger generation need to take into account when returning to the ranch.
1. Have you been asked to return?
2. Is there a business need for you on the ranch?
3. What will your compensation be for working on the ranch?
4. Where will you live?
5. Do you have any siblings? What are their plans for the ranch?
6. Are you married? What if you get divorced?
7. What will your spouse do? Will he/she work on the ranch?
8. How do you protect your investment from potential disagreements with siblings?
9. What is your retirement plan? Do you want to pass the ranch down to the next generation?
10. Who will be your advisory board, such as accountants, lawyers, etc.?
11. Is it smart for you to return to the ranch?
12. Document everything, especially when it comes to family business.
It’s never too early to start planning the next transition, Krebs said. Older generations should consider “gifting” pieces of the ranch – up to allowable tax limits – each year in an effort to make financial implications easier for both sides during the transition.
In Indart’s case, living and working on the ranch full-time didn’t make a lot of sense until his dad was ready to start the transition. Instead, he worked in a variety of ag-related jobs including stints with Superior Farms and as a commercial real estate agent. He was away from the farm for 16 years before returning to take over full-time operations.
In the end, it made sense for Indart to buy the sheep business while taking over as manager of the family’s farming operations near Clovis, Calif. But he stresses that there’s no one size fits all option for making the transition from one generation to the next.
“You can work your way into the business and then buy it out, form a partnership, make your own money and then buy it out in one transaction, or just grow things organically while working a regular day job,” he said, adding that tax and finance professionals can help you best understand the options. “There have been times that I’ve asked myself – and my wife – why am I doing this? My dad pushed us to find our way off the ranch, and I did that. I always knew that I wanted to be a business owner, and along the way I decided that I wanted that to be the family business.”
Taking the floor last during the discussion, Rule said he’s turned over different aspects of the family operation to each of his three sons (and their wives). He’s utilized gifting to ease the financial strain of the transition, but there’s less he can do to handle the emotional strain that comes with the transition.
“There are times that I don’t feel like I’m a part of it anymore,” he admitted. “That’s scary for me. But the sooner you realize that you’re heading for a transition, the easier it will be for everyone.”
Other options to consider include the use of life insurance. If multiple siblings are involved and have different opinions about keeping the ranch in the family, then life insurance can help both siblings receive similar inheritances while elimminating the need to sell the ranch.
But the transition process is about so much more than just who ends up owning what and who’s in charge of what.
The next generations also needs those who’ve paved the way to help them understand all that goes into running a family flock. Some in the older generation are content to let their children “learn the hard way,” because that’s exactly how they did it. Others might offer advice that falls on deaf ears from a younger generation that counts on technology to solve all of its problems.
“When the older generation started, it was easier to work our way out of mistakes,” Rule said. “The risks are bigger now and the dollars are so huge. There isn’t a lot of room for mistakes now.”
For each of three operations included in the panel discussion, communication was key. Family members need to find a way to work together, so that the flock can continue to thrive with the next generation.