Exiting Farming: Financial Steps

• exit
• succession
• retirement

What are the main ways to exit a farm?

Common paths include transferring the farm to a family member, selling to an outside buyer, bringing in a partner and gradually stepping back, renting land to another farmer, or winding down and selling assets.

Each has different financial and tax effects and different effects on family. University of Minnesota Extension and University of Wisconsin Extension both emphasize that transition is a process, not a single event.

There is no single right answer. The best path is the one that fits your finances, your health and your family's wishes.

How do you start planning?

Begin by writing down what you want: when you want to stop, what income you need, what you want for the land and what you hope for the next generation. Talk with your spouse or partner first, then with others involved.

Then take stock. Prepare a current balance sheet and list what you own, what you owe and how each asset is held.

Set a timeline, even a rough one, and revisit it each year. Ask each person involved to write down their own hopes separately before you compare them. Differences are better found early.

What does retirement need to cover?

Estimate what you will spend, including health care and long-term care, and where income will come from: Social Security, savings, rent, installment payments or sale proceeds. Many farm families have most of their wealth in land and equipment, which can be hard to turn into income.

A financial planner who understands farm families can help, and so can your CPA. Be cautious about advice from anyone selling a product.

Keep in mind that Medicare and long-term care costs are separate questions from farm income, and an advisor can walk through them with you.

What are the tax and legal issues?

Sales, gifts, installment arrangements, leases and entity changes each have different tax effects. IRS Publication 225 explains farm tax concepts, but the details depend on your situation, so talk with a CPA before you act.

Estate and transfer documents, such as wills, trusts, business agreements and buy-sell arrangements, should be drawn up by an attorney who knows agriculture. These are concepts only, not legal or tax advice.

Ask whether any land is in a conservation program or lease, since those agreements may carry conditions at transfer.

How do you handle a transfer to the next generation?

Fair is not always equal. If one child farms and others do not, families need honest conversations about how to treat everyone fairly. Written agreements, a clear timeline and outside facilitators can help.

Give the successor real responsibility early, and let them build equity or income in the business. A plan that depends on the successor having no say rarely works.

Many families find a neutral facilitator or a farm transition educator helpful, since sensitive topics are easier with a third person in the room. Written agreements about who owns what, who works where and how income is shared can prevent hard feelings.

How do you prepare to sell?

Clean up records, resolve title and boundary issues, review leases and conservation agreements, and get appraisals for land, buildings and equipment. Understand how debts will be paid at closing.

Consider a sale of assets versus a sale of the business, and ask about the timing of the sale for tax purposes. Check the FSA website if you have FSA loans, for the rules that apply to payoff or transfer.

If you rent land to someone else, put the terms in a written lease and ask your attorney and CPA about the effect on your taxes and estate. Keep your lender informed from the start, since loans and liens affect how and when you can sell.

Who should be on your team?

A good exit team includes a CPA, an attorney, a lender, a financial planner, an appraiser and perhaps a facilitator or extension educator. Pull them together early and share the same facts.

Take your time and keep the family informed. Plans fail more often from poor communication than from poor math.

Revisit the plan after any major life event, such as illness, a death or a change in the market. Provide each advisor with the same set of documents, so advice is consistent and nothing is missed.

Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.