What will happen to your farm or ranch after you’re gone?
How do you balance business assets and family?
When creating a succession plan, families need to tailor it to their individual needs, said Anna Richards of Cornell University during her March 26 presentation at Northern State University.
“Succession planning is a very, very personal thing,” she said.
Richards, a dairy business management specialist for PRO-DAIRY Education and Applied Research, delivered the fifth annual Lamont-Rhodes Lecture. Richards discussed strategies of balancing goals and shared her expertise on agricultural succession planning to almost 300 farmers, ranchers, small business owners and others.
Richards went over terminology and processes related to a trust, which is essentially an arrangement where a person holds property for the benefit of someone else. Because they are so varied, trusts can be very flexible tools.
“A trust is whatever you want it to be within the confines of the law,” she said.
There wasn’t a one-size-fits-all plan for passing along the farm. However, Richards passed along recommendations for choosing trustees.
- Choose at least two people: one person familiar with agriculture and business and another familiar with the family.
- Avoid picking someone who could be competition for the farm down the road.
- Pick someone whom you would trust with your money.
- Choose someone who is preferably younger than you.
Richards also advised that clear communication can solve issues down the road.
“At the end of the day, what’s most important in all of this is communication,” she said.
“You can have the best agreements in the world, but if nobody understands what they are, what they’re supposed to do and what your actual intent is, they don’t do a whole lot of good. Actually, they do attorneys a whole lot of good because then they get to spend a lot of time fighting over what these documents say and what you meant for them to say, and they make a ton of money off of it. For the rest of us, though, and for the rest of your family, the more that they understand, the better.
“When you’re picking a trustee, let them know, and bring them in to some of these meetings as you’re putting it together,” she continued. “This is not a one-meeting thing where you sit down and bang out a trust. These take time to put together, a lot of time.”
Some of Richards clients have taken up to two years to put together a trust because every time they would sit down to discuss it, the client would have thought of one more thing to include, she said. That’s good, she added, because you want to think through everything you are trying to accomplish.
Once a plan is finished, Richards advises bringing in all the trustees, heirs and anybody involved, and going over the documents in plain English. Make sure they understand exactly what it means to them and set clear expectations.