It’s that time of year again! Days are growing longer—farmers are itching to get back in the field full force. Farm succession plans are being dusted off and reviewed. OK, I’ll admit that the last one probably isn’t happening . . . but it should be. Successful farmers often get so focused on their daily tasks, they forget to step back and ask how all the daily toil fits into the bigger picture of their farm succession plan.
“Every family is unique. Every farm is unique.
Consequently, every succession plan MUST be unique.”
As ag producers begin a new year of farming, I want to suggest the “Top 5” things farmers should not lose sight of in furthering their farm succession plan. It just makes good agri-business sense that we’re all aware of the following important succession initiatives.
- Select a Team of Advisors. Every farm needs to identify a team of advisors to assist in the farm succession process. These advisors typically consist, at a minimum, of the following: (1) an attorney, (2) a CPA or tax return preparer, and (3) a financial advisor. The attorney will prepare the necessary legal documents while providing valuable advice to maximize the estate while avoiding pitfalls. The CPA or tax return preparer will identify tax minimization opportunities. The financial advisor will manage financial products and analyze cash flow to ease concerns about life during retirement. And finally, these advisors will provide a system of checks and balances to ensure that the producer’s best interests are always being served.
- Create a Farm Succession Plan. Every family is unique. Every farm is unique. Consequently, every succession plan MUST be unique. Keep this in mind as friends and neighbors are consulted to see what they are doing. Notwithstanding that uniqueness, most farm succession plans typically consist of two main components: (1) an estate plan (i.e. Revocable Living Trust/Last Will and Testament) which states what will happen when the owner passes away, and (2) lifetime transition planning which often includes selling or gifting of assets to successor generations and may include the creation of business entities (e.g. LLCs, Corporations, Partnerships, etc.).
- Review the Farm Succession Plan. If a farm succession plan already exists, review that plan every 1-5 years. It has been said that change is the only constant in life. Beneficiaries’ lives change, tax laws change, assets change, and the farm economy changes. All of these changes can create risks that need to be addressed and opportunities that may be available.
- Make Sure the Estate Plan Has Asset Protection Planning. It is critical that the estate plan address potential risks following death. These risks include, but are not limited to, the following: (1) the remarriage of your surviving spouse, (2) a beneficiary’s divorce, (3) a beneficiary’s unexpected death, and (4) lawsuits. The gift of asset protection is often just as important as the assets.
- Communicate the Plan to Beneficiaries. A family meeting is a great way to ensure harmony among beneficiaries. The meeting allows for expectations to be set for what will occur at death, gives beneficiaries an opportunity to ask questions, and allows beneficiaries to meet the advisory team. When beneficiaries know what is going to happen at death and then it happens, the administration of the estate almost always goes smoothly.
ABOUT THE AUTHOR: Evan D. Anema, Attorney at Law
Evan is the founding partner of Estate Planning Solutions Law Firm, LLC, in Sioux Falls, SD. His expertise includes estate planning, farm and business succession planning, probate and trust administration, advanced estate tax planning, asset protection planning, charitable planning and special needs planning. Evan designs customized estate plans that focus on preserving family relationships and assets, as well as multi-generational planning. Evan is licensed in SD, MN and IA.
Make 2019 the year of the farm succession plan—for yourself or your partners and patrons in agri-business. At VistaComm, we wish all farmers, producers and their associates a safe, happy and prosperous growing season!