Aug 23, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin

4 Succession Planning Pitfalls

July 31, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
Legacy Pioneer DuPont Attribution 2012
  

Don’t let these common mistakes sabotage your family’s goals, dreams...

Look around your farm. You’ve worked tirelessly to create, maintain and improve your operation. What will it become after you’re gone? Succession planning is not an easy task. To get you on the path to success, learn how to overcome these surefire slipups that can wreck your plans.

cone1

Never Leaving the Bench.

While it seems simple, Kevin Spafford, Farm Journal succession planning expert, says the biggest mistake farmers make is not taking the first step—creating a plan. "For the most part, farmers don’t plan, so getting over that hurdle and taking action is the first step on the road to success."

Spafford says to always start the process by having a family meeting.

"Family communication is vital in the succession planning process," Spafford explains. "All family members who are active in or dependent on the farm and their spouses should be invited."

He says a clear agenda and goals should be defined prior to the meeting, and it should be held in a neutral location. That environment will allow your family to define common goals and create a preliminary plan.

cone2

Not Using All of the Available Succession Planning Tools.

There is no one-size-fits-all option. Farmers need to weigh all of the options available when creating a succession plan, says Cari Rincker, principal attorney with Rincker Law in New York, N.Y.

Identify the best business structure for the operation. "If a farm is run as a sole proprietorship, the business dies when the principal dies," she says. "Establishing an LLC or limited partnership, for example, allows the elder generation to maintain management in the farming operation while gradually transferring ownership and responsibilities to the younger generation."

Consider a trust. "A benefit with trusts is they avoid probate, expediting the transfer process and helping farm families maintain privacy," she says.

cone3

Worrying You Will Offend Family Members.

Regardless of where you are in your family’s hierarchy, succession planning is an emotional issue. It’s not uncommon for families to avoid confrontation to try to keep the family happy. "Parents are reluctant to choose among the children," Spafford says. "This can lead to unqualified children running the farm or an approach that attempts to treat all family members evenly. When the bulk of the estate is a family-owned business, it’s inappropriate to divide equally among active and inactive children and/or allow inactive family members to exercise management decisions."

cone4

Allowing Your Plan to Gather Dust.

Reality check your plans. "Sometimes an estate plan might work on paper, but once you start playing out hypothetical scenarios, the plan isn’t realistic," Rincker says. "It’s a lifelong process that will morph along with the changes that life brings to you and your family." Spafford says farmers should annually review their entire succession plan. "Set a date on the calendar every year," he says. Spafford also advises having a succession planning professional or lawyer analyze the plan for a second opinion.

Download more than 20 tools and guides to better navigate the planning process. www.FarmJournalLegacyProject.com/tools

See Comments

FEATURED IN: Top Producer - Summer 2013

 
Log In or Sign Up to comment

COMMENTS

No comments have been posted



Name:

Comments:

Legacy Newsletter

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 

Follow Us

Facebook Twitter You Tube
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions