Posted October 22, 2019 by John Posey
I had the opportunity to listen to Allan Vyhnalek, UNL Extension Educator, at Husker Harvest Days this past September and found his discussion on farm succession to be a useful one. Allan was generous enough to share his power point slides with me and they are attached below. Here are seven succession planning tips that I took away from his presentation:
- If you don’t have it in writing, it’s a lie. If you’re telling yourself or members of your family the intentions you have with transitioning the farm and it’s not in writing, it’s just lip service. Someone other than you will be calling the shots if you don’t get it in writing.
- Begin with the end in mind. First, establish your vision (i.e. – semi retire, fully retire, never retire, etc.) of your operation and set goals that fit the vision. Even if you hope to never retire, you’d be wise to consider what should happen next if you were forced to in some capacity.
- Are Mom/Dad and/or Grandpa/Grandma on the same page? Now we’re probably hitting uncomfortably close to home for some. This could be the biggest roadblock to getting anything accomplished if there’s not mutual agreement here, but it’s one that has to get resolved if a successful outcome is going to be realized.
- When you are done, will you still have a family? Be careful on making assumptions on how well your children will get along and what assets they will want to keep. If you really don’t like your kids, just let them figure how to divide everything up when you’re gone! But joking aside, let’s honorably choose to love our kids, be a responsible adult by getting a plan in place and commit them to being part of the process where appropriate. Don’t view a written plan as a permanent, lifetime decision. It can be and should be amended as things change.
- A notice to heirs—Be careful making assumptions on a sweetheart deal. It can be easy to let perceptions rule our judgment without having all the facts and considerations when it comes to the so-called “sweetheart deals” given to the farming kids like discounted rent, equipment, etc. This is where the line between fair and unfair is blurred by the seemingly unlimited opinions and subjectivity that can also be coupled with not truly knowing or recognizing the full scope of the farming heirs’ contributions. First, mom and dad should get all these potential sweetheart surprises out on the table to diffuse it from becoming a source of contention. Secondly, I would suggest getting the all too common “love equals money” impulse out of everyone’s minds, take a step back and re-evaluate the circumstances with an empathetic outlook to the outcome everyone should be trying to contribute to—an equitable, not an equal succession plan. Even if siblings think dad, mom or anyone but the heirs active in the farm are the brains behind it all, I think most reasonable people would agree the heirs involved in the farm should be given equitable consideration for their contributions. Allan gave an example of a family giving the farming siblings 1% equity ownership each year they’ve been on the farm as a way of providing sweat equity to the next generation. At the end of the day, the transitioning owner of the operation has the gold and it’s their rules. View fairness as helping everyone be successful rather than merely being equal.
- Communication is the key. Seek to understand, then to be understood. Effective communication and follow through will be primary factors contributing to a successful succession plan. Review Allan’s slides below for more detail on setting up family meetings and communication tips. Also visit https://agecon.unl.edu/farm-succession where you can find more useful information from Allan and the Ag Economics team at UNL. And if you have to deal with challenging family dynamics to say the least, I’d suggest visiting farm succession consultant Elaine Froese’s website (elainefroese.com) for more resources on the subject.
- Review your most recent financial statement. Be prepared before meeting an attorney, financial planner and CPA. What do you owe and what do want to do with your assets? Assemble your team of professionals and execute your vision.
And lastly, try to avoid the Circle of Inaction. If it feels too complicated, you don’t like to plan or the thought of retirement and your mortality is just depressing, I get it. These aren’t particularly fun topics to talk about for most but your kids and/or heirs will thank you. If you want to provide a lasting legacy or just have some peace of mind around the possibility of retirement, going through this process is essential. If you like the idea of simplifying the process by partnering with someone to assemble a team of professionals that work together to create a plan that aligns with your vision, the services Plains Advisory provides may be a good fit for you. I hope you find these tips beneficial as you plan ahead for your success and the success of future generations.
Advisory services offered through Plains Advisory LLC, an investment adviser registered with the State of Nebraska. Insurance products and services are offered and sold separately through John Posey, a licensed insurance agent. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
Any information provided is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal, tax, financial or investing advice and cannot be used to avoid tax penalties or to promote, market, or recommend any plan or arrangement. Please note that Plains Advisory LLC does not give legal advice. You are encouraged to consult an attorney.