At The Shealy Group, we have personal experience with family farms which helps us to connect with our agribusiness clients on a personal level to help them manage their business and assets. Succession planning is an important topic in agribusiness and one that needs to be carefully thought through and planned. Below are some guidelines for a successful farm succession plan.
There are some things you should know up front. Unlike estate plans, which concentrate on the heir’s tax liabilities and the various ways to lessen the tax burden, successions plans focus on the future of the farm and are an integral part of an estate plan. The important first step is to determine your desired end result. Among the important questions, you should ask yourself:
- What do I (or my spouse and I) envision for the future of the farm?
- Do I want to stay involved with the operation on a smaller scale?
- What kind of income might I need for retirement or health care costs?
Ease the transition to the next generation with careful preparation and making time to talk to your family about succession planning. If you are uncomfortable with the thought of ending your involvement with the farm, but have a family member who could and may want to take over the operation, you should be comfortable they have the knowledge and skills to run it profitably. Making the time to develop a solid transition plan for your farming business may ensure that your family’s wishes are met, and emotional stress is minimized. Some aspects that a succession plan may include are:
- Transferring or selling ownership to a vested family member while maintaining fairness for any off-farm heirs, with equal settlements of money, stock or other assets.
- Liquidating farm assets (i.e., auctioning equipment and livestock, and selling land).
- Renting or leasing the land and equipment.
- Finding a successor to operate the farm, and selling or contracting the property to him or her.
Enlisting the help of qualified professionals who have no stake in the final decisions is the best way to ensure that the plan is crafted and put in place without bias or emotions. Also, you want to make sure you get the plan right the first time around. Succession plans sometimes fail because certain risks were not considered during the planning stages, including:
- Inadequate cash flow.
- Liquidation of some assets to provide for retirement.
- Poor estate planning.
- Unresolved issues between family members or a successor who’s not prepared to lead and manage the farm business.
If you're unsure how to answer any of the questions above or if you feel that you are in over your head while developing your succession plan, let us help you! Contact us today by phone or using the online form to connect with a trusted advisor or to schedule a free consultation!