Estate planning is often legally and financially complex, but if you’re the owner of a family farm, every financial, legal, emotional and cultural issue possible seems to crowd into the decisions.
You don’t have to solve it all at once. Your task may be clarified by focusing on your values and plans and those of the generations to which you’re leaving the family business.
Knowingthe values of those involved
When an estate plan is executed, it often reflects the desires of someone who has passed away rather than those left behind. When it comes to transitioning a family farm to the next generation, the core values of everyone who’ll be involved can shape the roadmap for the future.
For everyone leaving or receiving assets, it can make all the difference to talk about wants, hopes and fears about your farm passing to new management. Also, what does each person really need to happen?
An inventory of the farmas an ongoing business
Experts urge being realistic and clear about the human resources available to handle daily operations at the farm. How old is everyone, how is their health, how knowledgeable are they, and how interested are they in operating an agricultural production business? What is your plan for training in these new workers and transitioning into a new management structure well before your health forces the issue?
How is the business doing today? What are its precise debts, assets, expenses and income? What is owned to its stakeholders? Create a clear and well-drafted spreadsheet.
Creating business plans and creating retirement plans
As a business, where is the farm now, where is it going, where should it be going and what is the plan to get from one place to another? A formal business plan allows every stakeholder to know what they need to do and allows everyone to clearly see whether the plan is on track.
The generation inheriting the farm needs a retirement plan, too. Can you, your spouse, your children and your grandchildren see how the business plan creates a path to everyone’s financial future?
Because a transition to the new generation will happen eventually no matter if everyone or anyone is prepared, it’s important that all these plans and timelines include a schedule for transitioning control of the business to the next generation. The success of your and of your children’s retirements will depend on that transition.
A detailed, 12-step guide to this sort of approach to generational farm transition is available from KSU extension.