7 Proven Steps to Farm Succession Planning
By Steve Steinman, Steinman Financial Network
1. Start your succession plan sooner rather than later
Like any other form of planning, the earlier you start, the more options you will have. An early start will also give you time to call on the professional legal and financial planning advice you need to achieve the best outcomes.
2. Look to your relationships to secure an understanding of everyone’s future goals.
When people form relationships, there are at least three levels of expectations involved:
• those that we know we have and talk about (e.g. that we want to continue to work and live on the family farm)
• those we know we have but haven’t discussed (e.g. that we want to inherit the family farm)
• some we don’t even know we have - until they are not met (e.g. that we will be able to live on the family farm until we die).
How these expectations are managed has a strong bearing on the success of relationships and associated issues like succession planning. Get everyone to put their real expectations on the table so you have a solid basis for negotiating the future.
3. Secure a family commitment to see the Farm Succession Planning through.
Farm Succession Planning is not a one-time event, it is a long-term strategic process that involves executing the plan and re-adjusting based on the changing family situation (new family members/members that pass on) and the economic market.
Letting your family know that this is a long-term process that will benefit everyone involved and getting their commitment early on to participate to the end is an important preliminary step.
4. Communicate clearly, honestly and often.
The way country people usually communicate can make it hard to address tough issues like succession:
• Talk tends to be understated and focus on daily routines and tasks
• Those who work and live within a family often make a lot of (frequently incorrect) assumptions
• Many don’t recognize that a lot of communication is in what’s not said - silence may not mean agreement, but just the opposite
• A natural courtesy may lead to avoidance of hard questions like “Dad, when are you going to retire and give us a clear run?” It’s often hoped things will sort themselves out.
Real farm succession planning issues are not financial, not taxes, they are not business related at all in fact.
They are based on your ability or inability to talk with your family members honestly. If you can talk out the issues, concerns, dreams, and assumptions with each and every person affected by the decisions you will ultimately make – you will have the basis for your farm succession plan
Enduring family farming businesses avoid these traps. People communicate regularly (perhaps weekly) in a structured way, making it much easier to introduce and work through tricky topics like death and divorce. Since their impact on business succession is undeniable, it’s foolish only to broach these issues when there’s a crisis and feelings are running high.
Once everybody’s on board with the future direction, seventy-five percent of the equation has been solved.
5. Enlist the help of experts.
If you can’t move the farm succession planning process along on your own – this is a great opportunity to bring in a professional farm succession planning expert like a financial planning expert who has experience in facilitating succession planning strategies with farm families.
An experienced expert will be in a position to ask the difficult questions, truly listen to the answers and take note of everyone’s goals and expectations with respect to the process. Most importantly, it will be the farm succession planning expert’s responsibility to develop the final farm succession plan that strives to meet everyone’s goals.
An expert can help you:
• Identify the needs and aspirations of each family member in each generation.
• Build, maintain and, if necessary, repair relationships between family members manage expectations.
• If succession is an option, work out what the exiting generation wants to do, where they’ll live, what they’ll do in retirement etc. and look at transferring management and control of the farm business over time.
• Establish how you will finally transfer ownership of the farm.
• Establish the agreements necessary for incoming children and the provisions to be made for children who leave the farm.
Ultimately, your farm succession professional team should be made up of your lawyer, your accountant and your financial planning expert. Together, they will be able to ensure your families’ needs are met.
6. Set out a written Farm Succession Plan that identifies:
• How the farm owners will retire from the farm with guaranteed funds for their retirement
• How and to whom the farm will be passed on from one generation to the next
• How funds will be made available for transactions.
• How every member family will be taken care of.
• How financial decisions about the farm will be made.
You should inform all family members about the contents of this document and they should understand what is happening, who is to inherit what, when and the process to achieve it all.
Have the agreements that outline the future signed off by all parties.
7. Review your Farm Succession Plan yearly and make adjustments if required.
Steve Steinman, President of Steinman Financial Network has been helping farming families get unstuck with
farm succession planning for decades. His Farm Succession Planning delivers strategies that farmers can easily take action with and execute in their farm businesses.
Steinman Financial Network takes the high anxiety and stress out of succession planning. Their tools are grounded in years of working with hundreds of farming families and their businesses.
Steve speaks to the heart of farm family issues. He makes people feel like he’s literally been at their kitchen table for years.