Why you should begin estate and succession planning now—and not be paralyzed by fear of the process.
Estate and succession planning will have a huge impact on the future of your family farm. Yes, some perceive it as time-consuming, complicated, and emotional. But, this planning is crucial to securing your life’s work, passing on family values, and providing for your future generations and family farm.
“The single biggest problem in communication is the illusion it has taken place.”—George Bernard Shaw
The number one cause of disharmony among family farms is misperception. When we fail to communicate openly and clearly with our family members, we leave them guessing about our thoughts and plans. That failure to communicate can be based in laziness on our part, a false assumption that family members have somehow read our minds, or fear of disagreement about details of the estate and succession plans.
No matter the reason, failure to discuss the estate and succession plans for your family farm could create ripples in family unity and dysfunction in the farm business. Ensure that communication is effective so people know the future reality and the ways it may impact them. Many of us tend to avoid unpleasant conversations, but a lack of communication about these vital plans will create an even more unpleasant situation. If you talk about your estate and succession plans openly, you will find that your farm and family will be unified and stronger going forward. Speak up and share your plans, then discuss and finalize them together to avoid misunderstandings.
2. Overcoming Disasters
Being forward-thinking is key to managing possible future disasters. The potential disasters in agriculture are many: weather, death, disability, disease, chemical spills, fire, farm machinery accident, grain bin accident, etc. etc. Farming is not only fraught with these kinds of disasters but also with complicated tax matters, debt issues, and family problems.
Understanding the issues and challenges faced by your family farm is not a cookie-cutter experience. Think about the son, daughter, or other family member who farms with you and how each may be impacted by your decisions. What about family members who haven’t come back to the farm? Do their interests in some ways conflict with those of family members who have made the farm their livelihood?
What are the right ways for you to protect the farm’s assets, deal with creditors, and handle first right issues, insurance, or taxable estate issues? It’s a lot to think about and plan for, and sometimes we are just too close to the issues or not properly informed to make good decisions. Talk with someone who can help you define the threats you and your agriculture business face; then, put in place a plan to respond to any crisis that might occur. Being prepared will ease your mind now and ensure you can respond immediately and correctly when disaster strikes. It will also mean you have taken time to think through the possible impact of your response on every member of your family and team. Decisions made in the heat of the moment, when emotions are high and the situation is stressful, are seldom the best decisions.
Think back over the past ten years of farming. How many changes have come about in your operation? Have you diversified? Have other family members joined the operation? Have you added assets? Where are those assets titled? Life changes, rules change, and what may have looked good when you put it in place years ago may not be the right fit today. Review your estate and succession plan at least every other year—if not annually—to manage the changing situation and needs of your family and to protect the estate and your agriculture business accordingly.
4. Handing Over Control
Fear of things not being done “our way” or fear that others don’t share our demand for top quality can make it hard for us to hand over control of the farm to the next generation. Failing to hand over control can cause a loss of opportunity for the next generation and can endanger the viability of the farm. There are ways to handle your concerns without creating hardship for the operation, and one important tool will be your succession plan. Start planning early for when and how you will release control of the operation to those you are training to step up and assume those responsibilities. That way, the transition will be gradual and smooth, not a surprise to anyone, and will allow all team members to prepare for and accept the change in leadership.
5. Estate Tax
Estate tax can be tricky and needs careful consideration. Will the next generation handle debt the same way you do? Will they have to sell off property or go into debt to pay the estate tax? The impact on your farm and family will depend upon your planning and actions before your death. You have an amazing opportunity to set the farm up for success and easy transition when you seek the proper guidance to manage estate tax. This is one of those areas where it is imprudent to “go it alone.” Talk to the experts and listen to their counsel to avoid burdening your successors with estate tax they might not have had to pay. Be proactive in this area, and take advice from the experts.
6. Fair vs. Equal
One of the most-often asked questions when it comes to estate and succession planning is,” How can I be fair to the children who have worked with us in the operation while not forgetting about children who chose not to come back to the farm?” It is important to consider all options to determine the right answer for your family. Not everyone’s situation is the same. Look at all options, and seek expert guidance to choose what will be equitable for your family.
Be Prepared for Your Family Farm’s Future
Agriculture business estate and succession planning can seem overwhelming. However, this planning should be done over time, with expert guidance, and communicated clearly to ensure the whole family is aware of your plans. It’s your job to do everything in your power to have things in order before the estate and succession plans are needed. Use expert advisors who can guide you through the estate and succession planning process, keeping your family and team aware of what to expect in the future.
Just remember, you should start now because the future is not a given for anyone. Life is like a movie, not a snapshot. While we would like to think we’ll be around forever to guide the family farm, the truth is that stuff happens and things change. The threats (disasters) we discussed earlier could hit you and your operation at any time. While we don’t like to think about those things happening to us, we must be prepared. The future of your family and your farm will depend upon what you do today.
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