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Farm Succession Typically Requires You To Rethink Your Farm's Organizational Structure
When it comes to farm succession planning, aka passing down the farm or farm estate planning, there are seven keys - the most important of which is this. The farm's owners must be willing to redesign the farm business if they expect farm succession success. Ok, each of the other six keys are the most important ones too. That's because they all depend upon and build on one another.
Planning for succession does not have to be difficult if everyone is willing to communicate early and often, and being willing to address the possibilities that can be achieved by redesigning the farm's legal structure is one of the important topics for discussion.
If your farm is organized the way it has been organized for the last few decades it's probably because, operationally at least, there has not been a compelling reason to change. Now you just may have some reasons why the farm needs reorganizing if it is to become the vehicle for achieving your family's dreams and goals for the future.
Here are some areas where the farm you are now operating can use an organizational facelift. Your unique situation may call for other changes to be made if you are to be successful passing down the farm to the next generation
Perhaps it is time to consider separating the farm's ownership for its management. Often the farm's ownership is the last thing people are willing to talk about, much less take action on - but that does not mean they should wait to begin transferring management related tasks and responsibilities to the next generation on the farm. Doesn't it make sense to begin training your successors today, letting them make the inevitable mistakes while you're still around to offer advice?
This is also a test of the senior generation's willingness to face the reality that someday their son or daughter and their family will be making all the decisions. Leadership and management are two abilities they can only develop on the job. By the time you are all ready to begin transitioning ownership, you'll feel more comfortable in their ability to run the place successfully.
A major stumbling block, one that most often results in the "wait and see" approach that can be disastrous for everyone is the senior generation's unwillingness to face the fair vs equal question. Perhaps if you considered it differently, putting the efforts and commitments of those who are going to be running the place in the next generation in one camp and those you believe should receive a legacy because they are family in another.
It's not that anyone is loved more than anyone else - it's that for whatever reason they have chosen where they'll spend their lives in the future. Those who will own and run the farm in the future already have their inheritance - the opportunity to live the life of their choice and build on what you've accomplished.
So why not organize the business to pass the growth on to them and set aside money for the others starting today. Once thing you might consider is to make gifts to your off-farm heirs now while they are building their families and while you are here to see how they too are benefiting from your legacy to them?
And last in this article but first in everyone's mind is the financial security of the senior generation when stacked up against the growth required to make good on all the promises to everyone. The senior generation members are nearing the time when they will want (need) to begin receiving income from the farm that is not tied to their day to day activities. Call it retirement for lack of a more precise term.
The younger generation wants to grow the business at the same time.
The result can be very stressful for both groups. My suggestion is solve the senior generation's concerns first. They deserve to see where the money is going to come from, how taking more or less money will impact the farm's growth, and what options are available to them.
Solve their concerns first and they will put the same amount of determination into the farm's future as they have throughout their lives.
Succession and planning take place over time and the material above is for the important family meetings you'll be having. Planning for succession often involves peer group conversations where you can test from others involved in the process, and professional insights from your advisors - individuals involved with your planning for succession process.
I hope you'll use these thoughts when creating the framework of your succession and planning.
About the Author Farm succession planning does not have to be complicated unless you make it so. Only you have the power to make the decisions necessary, you alone have the authority and you alone are responsible for the outcome of your succession and planning process, whether they result or failure. If you are serious about farm succession and planning visit About Passing Down the Farm to learn more now.
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