He said, “It’s all done,” as he hurried to change the subject. For John and his wife Sara, planning for succession was checked off their to-do list. They had a trust and a life insurance policy. In their plan, the farm would pass to their son and the life insurance proceeds would be split between their daughters. “It’s really pretty simple, isn’t it?” John said, hoping I might agree.
If, like John, you have doubts about or waiver in your conviction to your plan, take a few moments now to answer the following questions. Though brief these 10 questions will help you to know whether or not you’ve addressed your succession concerns and adequately planned for the future. A simple yes or no will do; either you’re confident that your plans will do what you want, or you’re not.
- Are you confident your farm will remain in the family for future generations?
- Are you confident ownership will transition smoothly and with the least amount of disruption to the next generation?
- Are you confident your farm will continue to provide financial security for you and career opportunities for the next generation?
- Are you confident the operation can afford to bring in a next generation while continuing to pay the senior generation in retirement?
- Are you confident your family is fully aware of the who, what, when, where, and how of your succession plan?
- Are you confident your plan will keep the operation together, provide financial security, and allow the next generation to make the decisions necessary for success?
- Are you confident the federal and state imposed estate tax and other transfer costs will not force your heirs to sale the land?
- Are you confident your off-farm investments are sufficient to provide the senior generation an adequate income in retirement?
- Are you confident the farm is protected from the divorce, death, disability, and dissolution of any owners?
- Are you confident all of your tenant-landlord relationships are supported by written leases and, when possible, buy-sell agreements?
Though not a complete list, if you answered no, or are uncertain in your responses to any of these questions, now may be a good time to review your plan. A comprehensive succession plan should include plans for:
- Financial Security– Designed to provide financial security for all owners, family employees, and dependents.
- Ownership Transition– Combining financial, tax, and estate planning strategies to design an efficient and effective transfer to the next generation.
- Leadership Structure– Structuring the business in a manner that allows the next generation to manage the operation and make the decisions necessary for continuing success.
- Estate Tax– Coordinating estate planning strategies with the transition plan to mitigate the estate tax and minimize transfer costs. Also, the estate plan will provide for dependents in case of premature death.
True satisfaction comes from knowing you’ve committed to a plan that ensures your family may continue to farm for generations to come. Make 2021 the year you create a plan for multigenerational success.