Protecting the Future of a Farming Partnership

We think about risk management on a daily basis as connected to marketing, or even to crop insurance. But let's step back a minute and look at our farm from the outside. Let's view it as an insurance professional might – someone who is trained to think about all the varied kinds of risks.

Many of us farm in partnerships, splitting ownership of land and machinery and other assets right down the middle. It's not a pleasant subject to think about, but what if your partner died in an accident or from an illness? What would happen to the financial health of your farming partnership? Do you have a transition plan?

Starting is the hardest part

This is something that needs to be discussed in a crucial conversation with the heir of your business partner. Get all of the partners and their significant others around the table and talk about the future. It's important to understand everyone's feelings about the situation in order to put the right strategies in place. Here are the questions to ask:

If a partner died, would the heir want to stay involved in the farming operation?

Would she be able to handle the debt of the operation with her farming spouse gone?

Would she want to sell?

Would she contribute labor and/or management to the farm if she hadn't before?

How would that partner's work on the farm be replaced?

How would the financial structure of the operation look, going forward?

Sit down and build a plan

One good strategy for managing this risk is each partner having life insurance on the other partner, so if cash needs to be raised to buy out the heir, the surviving partner is not financially stressed by the death.

Dealing with this when the time comes is not the best business decision. If you wait until illness sets in, a life insurance policy will be difficult if not impossible to get. In the face of a fatal accident, you already have stress and emotions of the loss. It's tough to make wise business decisions under those circumstances.

This lesson isn't limited to full partnerships either. Maybe you simply share equipment with another farmer. Think about the risk of losing that partner suddenly, and resolve to put a plan in place to protect the future of your farm.

Because it's not urgent, making time to start this seems challenging. But it is very important. It's difficult being candid and sharing the feelings that go with this discussion.

There's a book I'd recommend if you're concerned that this will be especially difficult with your family and partner: Crucial Conversations by Patterson, Grenny, McMillan and Switzler (second edition paperback version available for $12.07 at Amazon.com).

Start today. The future of your farm depends on it.