Preparation is key for an effective farm succession. Don’t wait for a life-changing event. Take these documents and questions to your advisers for guidance. —Paul Neiffer and Polly Dobbs
Have you prepared your succession documents? The documents in the checklist should be up-to-date and reflect your current goals and concerns for your family and your farm business:
- Revocable Trust
- Durable Power of Attorney
- Written Operating Agreement (if farm is an LLC)
- Written Partnership Agreement (if farm is a partnership)
- Bylaws (if farm is a corporation)
- Shareholders Agreement or Buy/Sell Agreement
- Do your succession documents address the essential questions of a farm succession? Use this list to identify whether you have written, legally binding documents that answer the following questions to your satisfaction.
- Who receives my ownership in the farm if I, or one of my partners, die while owning and/or operating the farm?
- Is there sufficient “key person” life insurance in place to help the farm through a transition if I or a partner were to die?
- Is there sufficient life insurance in place for the specific purpose of purchasing the shares of a deceased partner (and providing for the family of the deceased partner) if I or a partner were to die?
- If I, or one of my partners, becomes disabled or incapacitated for a long period while owning and/or operating part or all of the farm, who will gain control of the farm and the stock/ownership interest?
- If I, or one of my partners, becomes insolvent, bankrupt or divorced and stands to lose an ownership interest/stock in my farm to a creditor or divorcing spouse, do the remaining partners have the right to reacquire that ownership interest/stock?
- Who will take my place at the farm if I die or become disabled?
If you answered “no” to any of these questions, you might need to start or review your farm succession plan.