According to a study from the Family Business Institute, only 30% of family companies survive through the second-generation, and just 13% make it through the third.

Agricultural enterprises are like other family businesses in many ways, but have some strong differences as well that warrant taking a close look at succession planning and estate planning through an agricultural lens.

First among these is the culture inherent in agricultural production. Agriculture is more than a business; it’s a way of life. It requires a commitment to the business beyond the dollars and cents. In most areas, productive farmland is more valuable economically when converted to non-farm uses. To continue agricultural activities requires a level of dedication to a broader purpose than mere economic activity.

Second, agricultural production is highly capital intensive, both in terms of land and equipment. “Land rich/cash poor” is a common refrain that describes the limitations an agricultural enterprise imposes on the passing of the enterprise from one generation to the next.

Third, the expertise to operate a successful agricultural operation isn’t easily transferrable. Unlike other professions where technical know-how can be imparted in a classroom setting, there’s really no substitute for the hands-on learning a successful agricultural operation requires. Differing microclimates, terrain, soil and water conditions, land use history, and any other number of varying features can require two seemingly similar operations within close proximity of each other to operate very differently in order to yield similar outcomes.

Despite the practical differences between agricultural operations and other businesses, there really aren’t any legal differences at the state level when it comes to estate planning. As a result, it requires a bit of flexibility and creativity to work within the broader legal framework to ensure the right conditions are established to ensure the continuity of the agricultural operation through succeeding generations.

I’ll further explore the issues of agriculture-focused succession and estate planning in subsequent articles under this heading.