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September 2012 Archive for Leave a Legacy

RSS By: Kevin Spafford, Legacy Project

Kevin Spafford is Farm Journal’s succession planning expert for the Farm Journal Legacy Project.  He hosts the nationally-televised ‘Leave a Legacy’ TV, facilitates an ongoing series of workshops for farm families across the U.S., and is the author of Legacy by Design: Succession Planning for Agribusiness Owners.

Transfers to Children

Sep 26, 2012

 Monta Livestock Water   NRCSFrom Legacy Moment (09/21/2012).
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Each family's situation is unique. There are a number of factors most owners need to consider when trying to equitably divide the farm or agribusiness among several children. Those factors are the basis for dividing ownership and other assets, which properties/assets each will receive, how much and when. Below are a few of the questions you, as the owner or as a son or daughter active in the operation, may wrestle with.
 
1. Will a current transfer of ownership to the active children create conflict among siblings if the inactive children do not receive an equitable share of the owner's wealth until after his death?
 
2. If there are multiple children who are active in the business, are they capable of working harmoniously with each other?
 
3. Are the inactive children comfortable with receiving no interest in the owner's business?
 

News & Resources for You:

 Not sure how to get the ball rolling?
 
The objectives of active and inactive family members always vary.
 
This worksheet may help you sort through the conundrum of "fair versus equal."

 

 

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Photo courtesy of USDA NRCS.
 
 
 
 
 

 

Got a Buy/Sell?

Sep 18, 2012

iStock Farmers HandshakeFrom Legacy Moment (09/14/2012).
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What if there were a simple test to help you decide if you need a buy/sell agreement?
 
As I've often said, a buy/sell agreement may be the most important, but most misunderstood and unappreciated document in the succession planning arsenal. In its basic form, a buy/sell agreement insulates the operation from unwelcome owners. It ensures an opportunity to continue the business of farming in the face of near-catastrophic disaster, such as the death or disability of an owner. A well-written buy/sell agreement may even function as referee if an ownership group becomes stressed to the breaking point over a disagreement.
 
Take a few moments to review the points below to decide if you need a buy/sell agreement:
 
1. Is Ownership by Outsiders Undesirable? This factor is most commonly seen in family organizations, but it can exist in any organization in which an existing group (in this case, owners) is tight-knit. A buy/sell agreement ensures that ownership interests cannot fall outside the existing group without the group's approval.
 
2. Is Ownership by Outsiders Subject to Approval? This is another common factor in the family enterprise, and it can be especially troublesome in a family farming operation where the existing owners are all immediate family and/or lineal descendants. The provisions of a buy/sell agreement should be written to ensure that all new ownership interests must be approved prior to transition.
 
3. Can Future Ownership Conflicts Be Foreseen? If it is anticipated that the remaining owner[s] would have difficulties coexisting with family members or other co-owners, a buy/sell agreement can ensure that the remaining owners are awarded first right of refusal for any interests that may become available due to death, disability, dissolution or divorce.
 

News & Resources for You:

When is the best time to negotiate a buy/sell agreement? (See Question 2.)
 
Here's how one family used a buy/sell agreement as an effective tool to achieve their goals.
 
Even if it's already in place, it makes sense to periodically review your buy/sell agreement. 
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Back to School

Sep 11, 2012

 Apples, straight from orchard   USDA NRCSFrom Legacy Moment (09/07/2012).

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As summer comes to a close and kids return to school, their minds turn to homework and class projects, new teachers and fall sports. Farmers are in the fields, harvesting—what, for some, might be the remnants of a difficult season and a reminder of the trials inherent to farming. For my team and me, it's time to evaluate the year's business results and renew our commitment for the year to come.

A not-so-small part of this annual ritual is a review of the textbook materials I started with 13 years ago, to learn the art and science of succession planning. The introduction in the first volume of the text explains the concept of precise planning. It reads:
 
Business succession planning includes developing an exit strategy for the owner and the business. Whether the strategy involves transferring ownership and management responsibility to family members, fellow shareholders, partners or to a third party, it should address the following issues:
 
  • Providing financial security to the owner after retirement.
  • Providing financial security for the owner's family in case of untimely death or disability.
  • Ensuring the business' continued success in the owner's absence.
  • Dealing equitably with children working in the business and those who are not.
  • Limiting ownership in the business to persons acceptable to all owners.
 
News & Resources for You:
 
"What are the benefits of a succession plan?" Find the answer and other FAQs right here.
 
How ready is the next generation to lead? Continue to guide potential successors through their growth and gauge their progress.
 
Remember that the Legacy Project 2012 Report is chock-full of information and resources to help you get started. 

 

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Photo courtesy of USDA NRCS.

Which Way Do You Approach Succession Planning?

Sep 05, 2012

Rovey FamilyFrom Legacy Moment (08/31/2012).
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delivered via email each Friday.


Not mine, theirs or yours: three dissimilar ways of approaching the succession planning process. Which way do you see it?
 
An attitude of "not mine" implies that you assume or hope someone else will control the outcome. Are you sitting by anticipating the succession planning outcome will align with your goals? If you are, is it any surprise when it doesn't turn out in your favor? If it's "not mine," whose is it?
 
Is it "their" responsibility? If it is, you can't affect the outcome. This approach makes you powerless and subject to the decisions of others. As a participant, you've basically released yourself of any responsibility and abandoned all control. If that's the case, you can't expect much and certainly shouldn't be surprised when the outcome is not the result you would have chosen.
 
If you approach the succession planning process as "your" responsibility, you can make a difference. You control the agenda, affect the decisions and react to the actions of others from a position of strength. Owning a problem isn't easy. That's why only the strong survive and the weak move on. When it's yours, you might not always win, but you'll be stronger for the challenge and better prepared to succeed.
 
So, rather than wonder whose responsibility it is, step forward and proclaim it's yours. Then do whatever it takes to make sure a succession plan is written and diligently executed.
News & Resources for You:

Make a virtual visit to three farming operations that remain successful because one or more family members stepped forward and said, "It's my responsibility to make a difference."
 

 

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Photo courtesy of the Rovey Family
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