Will Your Farm Survive You?
Farm succession planning is often includes both estate and business strategies that will increase the likelihood for the survival of your family farm business when you die or become unable to farm.
DO IT RIGHT
Each farm plan is different and must meet your family and financial needs both now and when you are gone. A successful farm succession plan will also help you do the following:
- Control your farm while alive
- Manage your farm if you become fully or partially disabled
- Transfer your farm:
- To whom you want
- The way you want
- When you want
- Save every last tax dollar, professional fee, and court cost legally possible
START IT NOW
The first step to planning a journey is to pick a destination. We suggest meeting with your family to find out what their wishes are. Follow that up with a meeting with your accountant to determine whether your needs and their wishes align. With that information, schedule a meeting with your lawyer to chart your path toward your goals.
PERFECT IS NOT POSSIBLE
If you wait until your plan is perfect, you will never stop waiting. Your goal should be to put the best plan together that you can based on the facts you know, the budget you have, and the goals you have set.
MAKE A LIST
In relation to income, farms are complex businesses with much more capital invested in real estate and equipment than do most other businesses. Start making a list of the real estate you own or lease as well as the equipment you have and what it is used for. This will help when trying to determine their values and relationship to the farming operation.
COMMUNICATE YOUR PLAN
Start to set expectations for your farm and family in terms of what you have and what you expect to leave behind. Let them know that it will be updated whenever circumstances change, and then let them know when it is updated. Many family disputes could easily be avoided if communication about death and its consequences was started early and updated often.
Keeping the Farm in the Family
Most farmers want to their family farming heritage to continue on to the next generation, but many struggle with the process of making that happen. Often farm families are large, but the bulk of their assets are necessary to continue the farm business. An equal division of these assets is nearly impossible, and everyone’s expectations may not be met with a planned transition from one generation to the next. Fair is not always equal and equal is not always fair. A professional experienced in family farm and business succession planning will help you find a way to ensure fairness, even if absolute equity is not a possibility.
Planning Your Legacy
Use the questions below as a starting point for beginning the planning discussion with your family. Typically everyone will need to sacrifice some of their own wishes for the common good of preserving the family’s farming legacy. Communicating with one another in an orderly fashion will help you identify potential areas for conflict and compromise. You will never know the answers to your questions unless you ask. While you might not always like the answer, many times you will be surprised how aligned your children’s goals and wishes are with your own.
Keeping Options Open
Be sure that you commit to a plan and not to an outcome. Often plans need to change and adapt to changing circumstances, such as unexpected health complications, technology gains, or due to new laws or regulations. Your family needs to know that your plan is a plan and not a guarantee. Keeping ongoing communication from year to year with your family members or other stakeholders will ensure that no one is taken off-guard by an adjustment to the plan. We often see the head of the family farm attempt to shield the family from bad news, but it can greatly harm the family in the long run if they are not able to adjust their plans as well.
- Can your family run the farm without you?
- Are funds readily available for your replacement to carry out your wishes?
- Will your chosen successor to the farm pay your family a fair price?
- Do you have a written buy-sell agreement with your chosen successor?
- Is your buy-sell agreement well prepared?
- Is your buy-sell agreement funded?
- Do you understand how the price or value of your farm will be calculated?
- Is the purchase and sale of your farm mandatory or optional?
- When you retire, will you have enough income?
- Does your succession plan provide for farm management?
- Does your plan consider your children’s differing skill levels or interest in the farm operation?
- What are the estate and other tax implications of your succession plan?
- Does your estate planning team understand farm succession planning?
- Have you compared the costs and risks of selling the farm versus keeping the farm?
- Do you have a budget to invest in protecting your farm for your family?
Free Initial Consultations
If you’d like more information regarding Farm Succession Planning, please fill out the form below. Or request an appointment to get started today.