Business Insider: Start Now on Succession Planning
April 12, 2021 As the average age of the U.S. farmer closes in on 60, the day when management and ownership of farms is drawing inevitably closer. That means for families who have not started succession planning; it is time to start immediately.
That’s the message from Dr. Adam J. Kantrovich, a Clemson University Cooperative Extension Associate Professor of Agribusiness and Director of the Clemson Extension Income Tax School. He says the following areas can help make complicated succession planning and transition a more successful process.
Reasonable Expectations
“Sometimes what we want is not economically feasible, Kantrovich says. “Many parents would like all their children to share the farm and its assets. However, it can’t be assumed all the children will get along to run a farm once the parents have passed.”
Think hard about separating the farm assets from other assets for the successors of the farm from the assets that may be for those “non-farming” heirs. By giving some children ownership or control in assets that are used for the farm while they are not actually taking over the farming business can create significant challenges.
Give the next generation time to make their own mistakes and show that they can rise to the challenge. Too many times the senior generation wants to maintain all the control which prevents the next generation from learning.
Communication is Key
Communication between the “senior” generation and the “successor” generation is absolutely needed. Both sides need to know each other’s expectations, goals and objectives to determine if there are any challenges and figure out a method to overcome the challenges without putting it off. Putting that off can create major problems after transition.
“We need to train the next generation of successors, but this cannot be done if they are not part of the process for things like going to the lender with the senior generation to request an operating loan, visits to the FSA office to make decisions on USDA programs, actually doing and understanding the bookkeeping or being a part of the decision making on the purchase of a new tractor.” Kantrovich says.
Build a Team
Too many times the family will rely only on one “expert” like an attorney or an estate planning advisor. When in fact, they should have a team which includes others that work in this area. Bring in local Extension staff or university faculty members that specialize in succession planning. They also can provide an objective outlook on the situation to help develop a plan. This plan can be taken to the attorney to develop the proper paperwork.
And do your own homework. Attend seminars and programs on the topic, talk to multiple people and get those that you trust involved.
There’s a Plan in Place
Kantrovich say whether you are succession planning or not, there’s a plan in place already. “If you did not develop a succession plan, the plan defaults to your wills,” he says. “If there are no wills, the succession plan defaults to the regulations determined by the state on which heirs will receive what portion of the assets in your estate. This may not be what you intended or even what you wanted to have happen. So, make sure you begin the plan development, now.”
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