Legacy by Design LLC.
Cultivating Multigenerational Success in the Agricultural Community
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Blog
Don't Let 'Em Fool Ya!
From Legacy Moment eNewsletter (08/20/2010) Please join us for future issues, delivered via email each Friday. Too many professional practitioners equate estate planning for family agribusiness owners with succession planning. Although there is a degree of overlap between the two practice areas, their goals are wholly and completely different. Succession planning is designed to provide a plan for the orderly transition of ownership from one generation to the next at the ...
Using Life Insurance to Create an Asset for Inactive Children
From Legacy Moment eNewsletter (July 16, 2010). Please join us for future issues, delivered via email each Friday. Jake owns a successful agribusiness. His son Chad has been involved in the operation since college. The operation is worth $4 million, and it represents significantly all of Jake’s assets. His other son, Clayton, is not involved in the operation. Watch Leave a Legacy TV ...
The Most Important Document You May Ever Sign
From Legacy Moment eNewsletter (April 23, 2010) Please join us for future issues, delivered via email each Friday. The unsung hero of many a successful generational transition is the buy-sell agreement. It is one of the most important documents in the succession planning arsenal. It protects the operation from the whims of inactive owners and off-farm interests. A well-written and properly executed agreement can ensure the operation remains i...
Not Minimizing the Estate Tax and Transfer Obligations
The ninth of twelve most common mistakes agribusiness owners repeat: Forget the estate tax just for a moment - not that it doesn’t exist. It does and, depending on whose version of White House politics you believe, it will continue to pose a challenge for America’s agricultural community. But the imposition of estate taxes will not, in and of itself, destroy the family farm. In most cases, a competent estate planning attorney, financial advisor and CPA can...
Confusing Equal with Fair: Treatment for Active/Inactive Heirs
The seventh of twelve most common mistakes agribusiness owners repeat: The single biggest question I hear in my client consultations, columns, and live presentations concerns ‘equal versus fair’ for actively farming kids and their non-farming (non-active) siblings. It’s asked in various ways - sometimes it’s framed as a simple comment like, “We don’t want to leave anyone out.” Other instances are more forthright: “How do we make s...
What is a Buy-Sell Agreement?
Not clear about the function of a Buy-Sell Agreement? From Annette Higby (of Farm Transfer & Estate Planning, published by the University of Vermont Center for Sustainable Ag), here is a good definition: "A buy-sell agreement can be used to protect the heirs of the partners and to ensure a smooth transfer of a...partner's share in the business to the remaining partners. A buy-sell agreement provides for stable continuity of the business without a threat of termination upon the dea...
Motivation to Communicate
Motivation key to estate planning (by Beth Forbes, July 18, 2007) reviews the impetus behind the Purdue Extension website, Getting Motivated for Estate Planning. Sharon DeVaney, Ph.D. of Purdue University created the site to "help people see the need to put estate plans on paper." Says DeVaney in the article, "Often estate planning keeps dropping to the bottom of the list when it comes to priorities. Getting them to move that to the top of the to-do list is our goal with thi...
Fair vs. Equal
What do Parents Owe Their Children? by Jill Falloon of Manitoba Agriculture covers the complex and delicate topic of 'fair vs. equal' in terms of farm succession planning. The headings in this piece will give you the big picture: Understanding Family Tensions Types of Justice Entitlement Making Sense of It All Consider Discussion at a Family Business Meeting Ultimately the Decision is Yours Maintaining Family...
Estate Tax in perspective
Though estate tax planning is an important element of a comprehensive succession plan, in a decision-making process it should not become the tail that wags the dog. Take a look at "Slipping Past the Estate Tax" (Maureen Farrell, Worth magazine, December 2006). This is an excellent primer for the potential estate tax issues we all face as business owners.
Equal isn't always the best approach
Most parents take pride in treating their kids equally, yet when it comes to succession of a family agribusiness, that may not be the best path. If all of your children are passive (not actively involved in the business), it may indeed be possible to equally divide ownership. With the kids as shareholders to a corporation, operational responsibilities would be handled by a third-party manager. If, however, some of the children are active in the business and others are passive, consid...
Buy/Sell Basics
Wondering about whether a buy/sell agreement is appropriate for your situation? Its purposes are broader than many owners realize. Here's a brief primer... A buy/sell agreement covers the transfer of your business interest to new owners. It includes the conditions of business transfer and the method of valuation. More specifically, a well designed buy/sell agreement should: 1. Ensure the continuity of your business. Succession is about transitioning your business to the next ge...