Push the gas and don’t let up until a plan is in place
We’re in the homestretch of 2013. The urgency of the planting, growing and harvest season is moderating, and the air has the familiar nip that heralds winter’s arrival. There’s no better time than now to pick up where you stalled out on your succession planning journey.
An August 2013 AgWeb survey of more than 1,000 farmers found that almost half say they have a formal succession plan in place. Those numbers are encouraging, says Kevin Spafford, Farm Journal succession planning expert.
"When you dig deeper, though, more than 80% of the respondents have thought through ownership transition and estate distribution, which is a good start, but only 46% have actually planned for retirement and only 26% are thinking about leadership training for the next generation," Spafford says. "For a succession plan to be effective, all of those provisions have to be factored in, as well as an annual review."
Years ago, most written plans were merely estate plans that, more often than not, used typical planning provisions to aggregate an owner’s assets and then divide them equally among all heirs. "This method effectively divided the operation between active and inactive children but destroyed any assuredness for the future of the farm," Spafford says.
Today, succession is about designing a plan that preserves, promotes and passes your accumulated assets—money, property and contentment—to a prepared next generation.
The journey starts with communication. About 62% of the respondents to the AgWeb survey have taken this vital first step by holding a family meeting, but more times than not, it ends there, Spafford says.
As the survey found, most farmers have consulted an attorney and to a lesser degree their accountant but then failed to keep the momentum moving forward in order to make a comprehensive succession plan a reality.
"You have to take responsibility for your plan, but a big part of seeing a succession plan come full circle is having the professional assistance to make it happen," Spafford says.
Start with a list of candidates, ask for recommendations and then interview the candidates once or maybe twice. Make a selection and evaluate progress toward developing a plan based on a predetermined timeline.
One of the biggest roadblocks in the process is equal versus fair distribution. "For most farm families, the operation represents 97% of everything they own," Spafford says. "The fair versus equal obstacle is not going away on its own, though, so face it and figure it out."
The good news is that the challenge can be overcome with good communication, involvement of active and inactive family members, and a commitment to find an acceptable solution for your family.
At each checkpoint, your intentions have to be recorded, Spafford emphasizes. "Writing makes it real," he says. "It forces you to make decisions, draw lines and commit to specific actions."
From those documents and notes, you can then conduct an annual review. Farmers know all too well that the only thing that is constant is change. That change can involve land values, commodity prices, family dynamics and a host of other factors. It’s natural to think about how a low in corn prices will affect your cash flow for the year, but have you considered how the same would influence the reality of your succession plan?
Regardless of when the transition will take place, "planning gives you the peace of mind to move forward," Spafford notes. "It does the same for your children when they know there’s a path paved to the future."
Succession Planning Workshops
- Dec. 9, Lincoln, Neb. (201 Workshop)
- Dec. 11, Peoria, Ill.
- Dec. 13, Indianapolis, Ind. (201 Workshop)
To register, call (877) 482-7203 or visit www.farmjournallegacyproject.com
Comprehensive Website: www.farmjournallegacyproject.com
Free Weekly eNewsletter: www.farmjournallegacyproject.com/eNewsletter
You can e-mail Katie Humphreys at email@example.com.