It’s a phrase I’ve heard time and again from farm families across the country:
“We had to buy out our siblings, cousins, or aunts and uncles, and we don’t want our kids to have to go through what we did.”
And yet, generation after generation, the same farm is sold within family. Each time, the next generation is burdened with debt and unable to grow the operation beyond what they inherited. This pattern doesn’t just threaten the future of individual farms but also stunts the growth of entire family legacies.
The problem with the buyout model
When a family farm is passed on through a buyout, it can create significant barriers for the next generation. In many cases, the farming heir must take on massive debt to purchase land and assets from their parents or siblings. That debt limits their ability to:
- Invest in equipment or technology
- Expand operations to remain competitive
- Manage financial risks during down markets
Meanwhile, off-farm heirs may expect a large payout - viewing the farm as an inheritance rather than a business. This can put pressure on the farming heir to “cash out” others, creating conflict and financial strain that can last decades.
What’s at stake?
The real tragedy is that these buyout scenarios often pit family against family. Relationships suffer, the business plateaus or declines and in some cases the farm is ultimately sold outside the family - ending generations of hard work.
Worse, this cycle keeps the farm stuck in “replacement mode” where each generation is just replacing the last - rather than “growth mode,” where the farm’s assets and impact multiply over time.
Six steps to break the cycle
Breaking this pattern requires more than good intentions. It requires proactive planning. Here are practical steps families can take now:
1. Define a succession vision early
Don’t wait until retirement to start the conversation. Define:
- Who wants to farm?
- Who wants to own land or assets but not farm?
- What succession looks like for each participating generation?
Start shaping a shared vision that includes both farming and non-farming heirs but prioritizes the long-term viability of the business.
2. Separate ownership from operation
Many families assume that whoever farms must own everything. But that’s not always necessary or wise. Use business tools to define roles and ownership:
- Operating agreements
- Lease-back arrangements
- LLCs, partnerships and trusts
These give the farming heir control of operations without requiring full ownership on Day 1.
3. Use gifting and discounts strategically
Reduce the future cost of transition using:
- Annual gifting of ownership shares
- Minority interest discounts on land or entity shares
- Well drafted family partnerships or trusts
These tools can reduce buyout burdens and allow for a smoother transfer of control over time.
4. Create a buy-sell or transfer plan
Formalize the plan for how ownership will shift. Consider:
- What happens when Mom and Dad step back?
- How are siblings bought out or compensated?
- What happens in the event of death, divorce, or disability?
- How will we establish a “family market value” for our farm?
Document these plans to prevent future conflict.
5. Fund the transition
Use life insurance, installment sales or operating profits to fund a family buyout - rather than putting all the burden on the farming heir. A well-structured plan can ensure fairness without compromising the farm’s future.
6. Work with a qualified team
Succession planning isn’t DIY. Involve professionals who understand agriculture - accountants, attorneys and succession advisors who can help you align tax strategy, legal structure and family goals.
Final thoughts
Families who succeed at succession treat the farm as a business first, and an inheritance second. That means planning not just for fairness today but for long-term sustainability at each generation.
When done right, the next generation can build on the legacy, rather than buy it back.
Downey has been consulting with farmers, landowners and their advisors for nearly 25 years. He is a farm business coach and the succession planning lead at UnCommon Farms. Reach Mike at mdowney@uncommonfarms.com.