Through years of working with high net worth farm families, Josh has refined strategies to help owners achieve their succession goals. As a Principal in Legacy by Design, Josh is dedicated to providing highly personalized succession solutions for farmers, ranchers, and agribusiness owners. He is instrumental in furthering Legacy by Design's growth, by serving as a trainer and liaison for Legacy Certified Advisors(tm) throughout the U.S.
The Role of Estate Planning in Succession Planning
Jul 01, 2011
Each day, I talk with farm families throughout the country. When I ask, “Do you have a written comprehensive succession plan?”, oftentimes the answer is yes. Yet, as I learn more about their situation, invariably I discover that, what the family has considered to be their ‘plan,’ consists solely of an out-of-date Will and possibly a Revocable Living Trust. Herein lies a major issue facing our Ag community.
Many practitioners and farm families equate estate planning with succession planning. Although there is a degree of overlap between the two practice areas, the goals and objectives are different. Succession planning strives to develop a comprehensive plan that will provide for an orderly transition of the ownership and management of the agribusiness. It prepares the operation for the owner’s retirement, disability or premature death. Accordingly, it focuses on transferring ownership to family members, co-owners, key employees, or third parties, and identifies capable successors to manage the business. Succession planning also ensures the financial security of all family members who are involved in the business and prepares the next generation with the skills and experience to successfully take the reins. By comparison, estate planning addresses the transfer of wealth to heirs; provides for survivors; and minimizes estate, gift and generation-skipping transfer taxes.
An agribusiness owner’s estate plan should be an integral component of the owner’s overall comprehensive succession planning strategy. Typically, the estate plan will complement the owner’s succession plan. This minimizes the risk that each plan may produce conflicting results if the owner dies prior to a completed transition. Estate planning techniques (e.g. gifting, family limited partnerships, LLCs, etc.) may also be used to facilitate the transfer of ownership to family members. In addition, the estate plan sometimes serves as the mechanism for transferring ownership and management when the owner has no intention of retiring, but instead plans to remain in control until death.
Once an appropriate plan
is in place, it should be evaluated on a regular basis (at least annually) to accommodate any family changes, tax law changes, and to rule out coordination gaps.
Photo courtesy of USDA NRCS.