The Generational Transition workshop combined the knowledge of producers who understand the emotional, financial, and legal considerations of ranch transition, and the legal considerations from an experienced estate planning attorney. The workshop was held on June 11th at the West Central Research and Extension Center hosted by the Nebraska Grazing Lands Coalition (NGLC) and Nebraska Extension.
Chairman of NGLC, Tim Kalkowski, stated the importance of transition to the future of farming and ranching, as well as the rural communities that depend on families moving back to support schools, work jobs, and support local businesses. The NGLC has hosted the informational generational transition workshops for many years, and due to the success continues to plan future workshops.
Kalkowski also served on the producer panel, sharing his story of their family ranch. After piecing together a ranch in nearby Boyd county, Kalkowski’s dad was diagnosed with cancer and died shortly after leaving four boys and his wife. Once diagnosed with cancer, the family developed a team to plan his father’s wishes: the attorney, tax accountant, and financial planner. “Our story is different that Mom, the brothers, and I are not living on the ranch, but invested in the legacy to continue ranching with our family. We have a manager that puts our mission and goals into motion.”
“Estate planning is ‘clean,’ but generational transition is ‘raw’ and ‘emotional,’” Kalkowski said. Transition requires good communication, respect between members, and all family members must contribute to the open and honest conservations. Other considerations included: is transition financially viable, what if the parents don’t agree, what if children feel entitled (greed spurred from farmland values), and what is fair to heirs.
What happens when you don’t have a family ranch to move back to? Loren Berger faced this situation as a young man. Berger came from a large family and struck out on his own, looking for the opportunity to manage and someday work a place of his own. Berger worked and moved several times, until another opportunity was raised. “Challenges and solutions” could summarize Berger’s struggle and triumphs as he worked with a mentor to buy the cowherd, take over grass leases, and eventually purchase ground. Like many beginning ranchers, cash flow was the problem. However, Berger found low interest FHA loans, integrated mixed breed genetics (now called “balancer” cattle), and found ways to cash flow by selling all his heifers, but taking their bull calves back on shares for the bull sale.
As Berger’s business grew, he brought college interns to work over the summer. One intern called after graduating and asked Loren if full-time employment was available. Fast forward fifteen years, and this young couple is working with the Bergers to take over the cowherd and leases, similar to what the young Bergers did. “I had the opportunity and I want to give that opportunity to someone else,” commented Berger.
Understanding the difficulty young producers face, Berger has worked with this young couple to ensure they are also viable. He is allowing them to defer payments until their cash flow comes in (eighteen months if you are selling bulls), guaranteed the pasture lease for 5 years, acting as the consigner with share bulls, and setting up a plan on how to resolve disagreements with a mentor. Communication is open and constant between the Bergers and the young couple with “many meetings across from each other at the kitchen tables.” They have worked to make it work.
Rounding out the panel was a hope story of Ryan Sexson. Sexson worked as hired hand for many years, but always longed for a place to manage. Growing up, he always heard there is “no opportunity in agriculture” and “I believe it,” he said. Young people must “build relationships and connections” urged Sexson. Through the relationships he built, he has been given the opportunity to lease a small ranch. Using skills and knowledge he learned from working for other ranches, he is improving the land with water development, infrastructure, and grazing systems. “Estate planning means nothing unless it involves transition.” The legal documents must be supplemented with management transfer, as well as knowledge sharing from one generation to the next.
Pamela Olsen, estate planning attorney, shared legal considerations for transition to the next generation. To continue family businesses, there is a need to transition control/ownership and management, and to have a transition timeline that meet the individual needs of each family business owner.
“(Your ranch) is more than dirt. You plan to leave a legacy and preserve the dirt for the next generation. Dirt matters.” This requires answering some tough questions, like what do you want to have happen with your assets while you are alive and when you are gone, what are the tax implications, how do I be fair to my heirs (on- and off-farm), and who does what jobs when I am gone (fiduciaries)?
If you have no plan, the state of Nebraska has laws that will decide who gets what and what amounts. If you pass with no estate plan or will, your living parents would inherit, as well as children or other living relatives. “Do you want the state to decide what happens to your place or would you rather create a plan that meets your individual needs and goals?” asks Olsen. Ranchers are out-of-the-box thinkers on a daily basis and can use this skill to come up with ingenious estate plans.
For more information on upcoming Generational Transition workshops, contact Bethany Johnston at firstname.lastname@example.org or visit https://nebraskagrazinglands.org/. Workshops are planned for August 13th at Nebraska Grazing Conference and November 21 at Harrington. NGLC also provides services to help ranchers with their ranch transition through the Ranch Transition Task Manager- contact Bethany or visit the NGLC website.
By Bethany Johnston, NGLC Ranch Transition Task Manager