Why Tax Planning Is One of the Most Important Parts of Farm Succession

When most farm families begin thinking about succession planning, they often focus on one big question:

Who will take over the farm?

But there's another question that's just as important—and one that's often overlooked until it's too late.

How will taxes impact the transition?

Without proper planning, tax consequences can create unnecessary financial strain, limit future opportunities, or even jeopardize the long-term success of the business.

In a recent episode of the Uplevel Dairy Podcast, Will McKinley, attorney with Menn Law, and Pat Sturs, CPA and agricultural tax advisor, joined Peggy Coffeen to discuss why legal planning and tax planning should always go hand in hand. Their conversation highlighted how proactive planning can help farm families protect both their legacy and the future of the operation.

Farm Succession Is More Than an Estate Plan

Many people think succession planning starts with a will or trust.

While legal documents are certainly important, Will McKinley explained that successful transitions require a much broader approach.

A farm isn't simply an estate—it's an operating business with land, livestock, equipment, buildings, debt, and income-producing assets. Every decision surrounding ownership has potential legal and tax implications that affect not only today's generation but those who follow.

That's why succession planning should be viewed as an ongoing business strategy rather than a single legal event.

Tax Planning Should Start Earlier Than You Think

One of the biggest misconceptions Pat Sturs sees is the belief that tax planning only matters when retirement is around the corner.

In reality, the best tax strategies often require years to implement.

Waiting until a transition is imminent can significantly limit the options available to a family.

By planning early, producers have more flexibility to evaluate ownership structures, understand how different assets are taxed, and create a strategy that supports both the business and the next generation.

The earlier those conversations begin, the easier it becomes to make thoughtful decisions instead of reactive ones.

Every Farm Asset Is Treated Differently

One reason farm succession can become so complicated is that not all assets receive the same tax treatment.

Land, machinery, livestock, buildings, and business entities each carry different tax implications.

According to Pat, assuming every asset can simply be transferred or sold in the same way is one of the most common planning mistakes.

Understanding the difference between fair market value and tax basis—and how each affects a transition—is critical when building a long-term plan.

That's why collaboration between legal and tax professionals is so important throughout the succession process.

Creative Planning Can Create Better Outcomes

Every farm is different, which means every succession plan should be unique.

During the conversation, Will and Pat discussed several creative planning strategies that may help families transition ownership more gradually while minimizing unnecessary tax burdens.

Approaches such as profits interests, structured ownership entities, phased ownership opportunities, or partnerships that allow younger generations to build equity over time can create smoother transitions while giving the business room to continue growing.

The goal isn't to find a one-size-fits-all solution.

It's to build a strategy that reflects each family's financial situation, business goals, and long-term vision.

Communication Is Just as Important as the Numbers

Although taxes and legal structures are highly technical, both Will and Pat emphasized that communication remains one of the most important parts of the process.

Every family member should understand the long-term vision for the farm, how ownership may change over time, and why certain decisions are being made.

Clear communication reduces confusion, creates realistic expectations, and helps families navigate difficult conversations before they become major disagreements.

Succession planning isn't simply about documents.

It's about helping everyone move toward the same future together.

The Best Transition Plans Are Built by a Team

No single advisor has every answer.

That's why Will and Pat encourage farm families to build a team of professionals who understand agriculture.

Attorneys, CPAs, lenders, financial advisors, and consultants each bring a different perspective that contributes to stronger decision-making.

When those professionals work together instead of separately, families often avoid costly surprises and create more opportunities for future generations.

The Bottom Line

Successful farm succession requires more than deciding who inherits the operation.

It requires understanding how legal decisions and tax strategies work together to protect both the business and the family.

As Will McKinley and Pat Sturs explain, the earlier families begin planning, the more options they have to build a transition that's financially sustainable and legally sound.

The best succession plans don't simply transfer assets.

They position the next generation for success.

To hear the complete discussion, stream now on Apple Podcasts or Spotify, or watch the full conversation on YouTube.