Succession planning is one of the most important aspects of passing on a farm to future generations, but having a conversation about it is not always easy. Jolene Brown, an Iowa farmer and professional speaker, and Nelson Schoon, certified financial planner and owner of Financial Framing, weighed in on some of the do’s and don’ts of succession planning.
AgriNews recently reported some great advice about what to do (and not do!) to ensure a smooth transition of your farm to the next generation or a new owner in “Do’s and don’ts of farm succession planning.”
DO make a plan. Farm succession is critical. It’s nice when you have trusts and wills, however, when you’re dealing with transferring a business such as a farm, there’s a lot more complexity. The majority of farmers are over the age 55, and if you can believe it, 80% of them do not have a plan.
DO hire the right people in the right positions. Like any closely held or small business, the fact that you’re related to someone doesn’t automatically mean they should be working on your farm. You may have some good workers who are members of your family, but all of your farmhands should be vetted and hired correctly.
DON’T wait. Unfortunately, some farmers pass at an early age and have no plan in place. This can create major problems for family members. Contact a skilled estate planning attorney right away to help you make a plan.
DO communicate. Ask yourself whether you want the farm to continue. If so, you need to communicate your expectations clearly so that the plan is known. Families need to have a legal estate and management transfer plan or a buy or sell agreement prepared. All of the concerned parties need to discuss details that go beyond the will.
DO make sure there’s enough money. It’s not that you need to have a super-prosperous farm ready for someone to take over. The next generation needs to be prepared with a business plan of how they will be adding value if they join the farm.
DO get it in writing. Remember that a conversation or phone call isn’t a binding legal contract. Work with your estate planning attorney. He or she will make sure that everything is legal and above board.
Reference: AgriNews (September 17, 2015) “Do’s and don’ts of farm succession planning”