Succession Starts Long Before the Signature

Leadership, not legal documents, is what determines whether a farm survives to the next generation

California growers spend years planning capital investments, planting decisions, water strategy and market expansion. Yet one of the most consequential business decisions many operations will ever face is often pushed to the sidelines until it becomes unavoidable.

Who will lead the business when today’s owners step away?

Succession planning has traditionally been viewed through the lens of wills, trusts and estate taxes. Those remain critical components, particularly as California farmland values continue to climb. Yet the experts who work with family-owned agricultural businesses every day say legal documents are rarely what determine success.

Instead, they point to leadership development, governance and honest communication as the factors that separate businesses that continue into the next generation from those that struggle once ownership changes hands.

“The biggest challenge is simply taking the first step,” said Tracy Schohr, UC Cooperative Extension livestock and natural resources advisor for Plumas, Sierra and Butte counties.

Tracy Schohr

“The biggest challenge is simply taking the first step,” said Tracy Schohr, UC Cooperative Extension livestock and natural resources advisor for Plumas, Sierra and Butte counties.

“I often hear from the senior generation that they are unsure where to begin. They face challenges finding the right professionals, are concerned about the costs, and they are uncertain about ʻfair versus equal’ allocations between children.”

That hesitation has consequences. As operations grow larger and more complex, postponing succession planning doesn’t simply delay an estate discussion; it can jeopardize the long-term stability of the business.

The Biggest Risk Isn’t the Estate Plan
Most growers understand they eventually need an estate plan. Far fewer recognize they need a leadership plan.

Dinesh Kumar, a financial advisor with AgroStar, specializing in agricultural enterprises and multigenerational farms, noted the greatest obstacle isn’t a lack of financial or legal tools.

“The primary hurdle is the lack of well-structured and truthful conversation within the family regarding expectations, control and fairness until a crisis situation necessitates making difficult choices,” Kumar said.

Questions surrounding ownership, leadership and inheritance often remain unspoken for years. Parents assume children understand the future. Children assume opportunities will eventually materialize. Meanwhile, no one defines expectations. Those assumptions become increasingly dangerous as businesses become more valuable.

Allow space for the next generation to put their fingerprints on the future. —Barbara Dartt

During the past decade, California farmland values have continued to appreciate, creating additional pressure on families trying to balance business continuity with equitable treatment of multiple heirs. Kumar said many families now find themselves caught between preserving operating assets and providing fairness to children who pursue careers away from the farm.

Schohr sees similar hesitation from producers across California.

“As the agricultural industry faces rising input costs, depressed markets and low returns, investing in an estate and succession plan is often viewed as just another expense, one that can be delayed until a better financial year,” she said. “Unfortunately, postponing these conversations can have huge costs to a family farm or ranch.”

The irony is that delaying the conversation often creates far greater financial and emotional costs than beginning the process early.

Ownership and Leadership Are Different Jobs
One of the biggest mistakes family businesses make is assuming ownership and management are the same thing.

Barbara Dartt, principal consultant with The Family Business Consulting Group, said many agricultural families never separate those discussions because the current generation often serves as both owner and operator.

“I think a lot of times both generations gloss those over and lump them together,” Dartt said. “In a lot of farm businesses, the owners and the managers are the same people.”

That model becomes increasingly difficult as businesses expand into third- and fourth-generation enterprises. Some children return to the farm. Others pursue careers elsewhere. Some become owners without working in the business. Others dedicate their careers to operating the farm but have siblings who share ownership interests.

Those realities force families to answer difficult questions that previous generations never faced, including: “Who should manage the operation?” “Who should own it?” “Should every child inherit equally?” and “Should ownership automatically accompany employment?”

Those discussions become especially complicated when nearly all family wealth is tied to agricultural assets.

“The complexity of agricultural operations can certainly stall progress on succession planning,” Schohr said. “However, I think the biggest complexity isn’t the operation itself; it’s the emotional capital invested in farms and ranches.”

She described farms and ranches as places where families built memories across generations, not simply real estate.

“It’s the first field where you drove a tractor, the pasture where you got engaged, or the oak tree where you ate lunch with your grandpa after baling hay,” Schohr said. “These places aren’t just assets on a balance sheet; they’re part of a family’s history and identity.”

The economies of scale that make a ranch or farm viable can be lost if land and other assets are divided among heirs, she added.

Kumar said many larger operations now rely on trusts, LLCs, buy-sell agreements and separate ownership structures that allow farming heirs to continue operating the business while providing equitable treatment for non-operating family members.

Leadership Isn’t Inherited
Passing ownership is a legal transaction, but developing leadership takes years. That distinction is where successful transitions begin.

“Succession should be a progression of responsibilities, not a single event,” Schohr said. “The next generation needs opportunities to move beyond working in the business to working on the business.”

That progression means much more than learning production practices. Future leaders need exposure to lenders, accountants, attorneys and business partners. They need to understand financing decisions, strategic planning and the reasons behind major investments before those decisions become their responsibility.

Dartt believes preparation starts even earlier and encourages families to give younger generations a genuine choice about joining the business. After all, children who feel obligated to return because they fear losing ownership often become less effective leaders than those who willingly choose agriculture as their career. Creating that choice, Dartt noted, strengthens both the family and the business over the long term.

Likewise, Kumar recommends beginning the transition years before retirement. One client started succession planning nearly a decade before the owner’s planned retirement, gradually transferring management responsibilities while establishing trusts, buy-sell agreements and regular family meetings that explained financial decisions to every heir. Policies governing compensation, hiring and ownership were documented well before leadership changed hands.

That level of preparation transformed succession from a single event into an ongoing business strategy.

Governance Doesn’t Happen by Accident
Leadership may pass from one generation to the next, but authority rarely does. As family businesses grow, the founder who once made every decision gives way to a more complicated ownership structure that may include siblings, cousins, outside executives and family members who own part of the operation without working in it. What worked when one person sat at the head of the table often breaks down once the business reaches a third or fourth generation.

That’s why governance has become one of the least understood, and most important, parts of succession planning.

“If you don’t make the decisions, the government will make them for you,” she said. “And I can guarantee that isn’t the plan you want for your family or your ranch.”

Tracy Schohr

Mike Fassler, principal consultant with The Family Business Consulting Group, said families often spend years talking about succession without ever creating a process for making the decisions that succession requires.

“Process. Decision. Action,” Fassler said, describing the progression successful families follow. Without that framework, discussions rarely move beyond good intentions.

Daily business demands make it easy to postpone those conversations. Planting, irrigation, labor and harvest always feel more urgent than planning for leadership 10 years down the road. Yet Fassler said delaying those decisions only makes them more difficult once multiple generations become involved.

Dartt has seen the consequences firsthand. One sibling wants growth. Another wants stability. Parents disagree over whether operating children should inherit more than those who pursued careers elsewhere. Those disagreements often remain hidden until the next generation asks where the business is headed.

“I’ve watched those situations where the next generation starts knocking on the door,” Dartt said. “They can’t answer it because they both want different things.”

Families frequently need an outside advisor because, as she put it, “if those folks could have had those conversations, they would have had them by now.”

The solution isn’t necessarily a formal corporate board. Instead, most recommend governance that evolves alongside the business.

Fassler noted successful enterprises clearly define the responsibilities of family members, owners, directors and managers as both the company and the family become more complex. Those boundaries reduce confusion while preserving one of agriculture’s greatest competitive advantages: a family that remains united around a shared business.

Dartt believes independent board members can accelerate that process. She described one multigenerational operation that regularly brings younger family members into discussions about business performance and long-term strategy long before they assume ownership.

Every succession plan ultimately comes down to more than transferring ownership. It requires today’s leaders to trust the next generation with shaping tomorrow’s business.

“Allow space for the next generation to put their fingerprints on the future,” Dartt said. “The leading generation’s dream alone will not sustain the enterprise into the next generation.”

Schohr reminds growers that succession planning isn’t a one-time decision or a permanent set of instructions. Plans evolve as families and businesses evolve. The danger comes from making no decisions at all.

“If you don’t make the decisions, the government will make them for you,” she said. “And I can guarantee that isn’t the plan you want for your family or your ranch.”

Publisher’s Take
The Big Picture: What to do Next

1. Start the conversation early

Don’t wait for retirement, illness or a crisis to begin succession planning. The earlier families talk, the more options they have.

2. Separate ownership from leadership

Decide who will own the business and who is best equipped to manage it. Those roles don’t always belong to the same person.

3. Develop future leaders now

Give the next generation experience with lenders, accountants, attorneys and major business decisions long before ownership changes hands.

4. Create a governance plan

Establish regular family meetings, define decision-making responsibilities and document expectations before disagreements arise.

5. Build a professional advisory team

Succession planning works best when attorneys, CPAs, financial advisors and trusted consultants collaborate to protect both the business and the family.