When it comes time to start thinking about handing off the farm operation to heirs, finding an experienced succession planner can be difficult. Even if retirement and a hand-off are still well into the distance, it’s never too early to start planning and discussing. After all, as farming has taught you many times over, life sometimes has bigger plans, so it’s always best to be prepared.
Work with an accountant: It’s important to understand and plan for the tax implications that come with transferring land, machinery and other assets. That’s especially important if you’re planning to build, update or expand in the next few years. A good accountant can help you get the pieces in motion so you can do everything possible to ensure a smooth transfer that doesn’t disrupt cash flow.
Discuss your plans ahead of time: Deciding how to hand off an operation to heirs can be tricky, especially in a situation where not all family members are actively involved with the operation. In fact, for parents, the decision can be downright painful. It comes down to choosing a solution that factors in the involvement, skill and interest of family members. Whichever approach works for your family (and the business), it’s crucial to have these tough conversations now. Let your plans be known to all family members, and explain the factors that went into the decisions so no one is blindsided or left guessing about your reasons.
Account for verbal agreements: It’s not uncommon for farmers to enter verbal agreements, especially with landowners. While there’s nothing wrong with living by a code where your word is as good as gold, it’s better to back these up with written agreements. This would ensure a smoother transition in the event of a death, incapacity or other disruptive event, and allow the operation to continue without interruption. There’s no need to get an attorney involved — a signed agreement that states dollar amounts and the property involved should suffice. It’s also a good idea to include a termination date and what needs to be done by each party to renew it.
Arm yourself with resources: Succession planning doesn’t get any easier with time. Luckily, there are many great resources out there to help you think through all of the issues, from taxes to long-term care. University of Minnesota Extension keeps you informed of updates at the state and federal level, hosts workshops around the state and has helpful information to kick-start the process. Also, Farm Journal’s Legacy Project features case studies, worksheets and other helpful resources.
Of course, insurance plays a big role in any legacy plan, so be sure to talk with a specialist at Minnwest Bank to see how we can help you prepare for the unexpected and protect your operation's future.