Greg, Julie, Kathleen and Jim Moes (left to right) have updated their buy-sell agreements to ease partnership transition and transfer.
Pieces start to fall together for the Moes brothers
It has taken a while, but momentum is building to get the pieces in place for Greg and Jim Moes’ transition plans.
The Goodwin, S.D., brothers are part of Farm Journal’s Legacy Project, which helps farmers transition their business to the succeeding generation. So far, 2012 has been an eventful—and gut-check—year for the family.
- In January, Greg’s appendix burst and eventually placed him in the hospital. "Another few days without treatment, and I wouldn’t be here," he says.
- In February, the Moeses went from a double-20 parlor to a double-30. They’re currently milking 1,900 cows and will grow to 2,200 late this year as the expansion is completed.
- On July 21, Jim’s daughter, Nichol, passed away at age 34 after contracting an infection following surgery. Nichol had worked on the dairy until several years ago.
- The drought of 2012, possibly the worst in 50 years to grip South Dakota, cut the Moeses’ crop yields by 25%. "But we’re better than many of our neighbors, and we should have enough forage to get us through until new crop next year," Greg says.
All of these events, Greg says, were a harsh reminder that life is precious—and that you have to keep pushing forward.
As part of that push, the brothers completed revisions of the buy-sell agreements on the dairy and land they co-own. The previous agreements required each brother to buy out the other’s interest within 60 days of his death or exit from the business.
That’s an incredibly short period of time, says Josh Sylvester, a farm transition consultant with the Legacy Project. The new agreements stipulate closings shall be held within six months of a "triggering event," such as death, divorce or insolvency.
On the advice of their banker, Greg and Jim are forming a limited-liability company for their jointly owned land base. That will ensure that if one brother leaves the partnership, the remaining brother can buy him out and the land will remain with the dairy operation. Payment will be amortized over 10 years in the event of the death of one of the brothers; a 20-year payout was agreed to for all other triggering events. Interest is set at 1% over prime rate.
Each brother owns half the shares of MoDak Dairy, Inc. The agreement stipulates that if one partner leaves, the last share will be transferred to the other for $1. That will allow the remaining brother to have majority voting control if the other brother transfers his stock to family members. The stock is set at 75% of book value. Buyouts are based on a 10-year payout.
Kevin Spafford, who leads Farm Journal’s Legacy Project, is pleased the Moeses are making progress. "We like to remind folks that succession is not an event, once and done. Rather, it’s a process."
- September 2012