It is not strange for a farmer to have 90% of everything they own tied up in the farm's operation. I am really not talking about whether you own it or the farm owns it or whether or not the farm corporation or partnership owns it.
What I am saying is that you most likely have very little cash that's not going to be wanted to run the farm and all of your other assets are being used by the farm to generate revenue.
So what will happen to your family, your partners, your family members, and even the farm itself when you die, prematurely of course.
Whether or not everything you, and maybe your parents before you, created will come apart or not will be the results of the plans you are making today.
Naturally every situation is unique, however there are only three possible options available to you when making your farm's plans for the future.
One possibility is to simply sell the place, liquidate the assets by selling everything individually. You've been to dozens of farm sales so you know what I mean.
Selling the farm one asset at a time, the sale strategy, will only return you a couple of pennies on the dollar for all of the assets, except maybe the prime farmland or the development-ready land you own. Mull it over, when you go to a farm auction do you go there to see just how much money you can pay for something? Of course not, and neither will your neighbours when they come to your family's sale.
Another choice is to sell the whole operation as a going concern. An illustrative example of this would be a fair-market sale to a neighbor's boy or to the farmer down the line.
The final option, the most popular option for most farmers of my experience is to pass the farm business to the next generation, a son or daughter, along with their partner and non-farm successors, so that the farm can continue on as it has for generations.
Passing down the farm is everybody's dream, having the business carried on by a son or daughter with mom and dad on the front porch watching over them, or perhaps on a cruise checking the web cam pop set up in the barn so he'll still check on the milking from half way around the planet.
These are some of the critical questions included in our new farm succession tool-kit, questions that demand answers before serious steps towards the ultimate transition of the farm ought to be taken.
Can your children run the place? Will your banker and trade creditors trust their judgement if you're not there to back up their calls?
What about your key workers, will they stick around and work for your successor or will they take off directly after the funeral? How do you know? Can they work for your children?
For that matter can your youngsters work together? What if there is just one inheritor on the farm and all the rest have no interest in running the company, just in getting their "fair share" of the inheritance?
Can you see any Problems here? Is it feasible the heirs will need their inheritance simultaneously the government wants its taxes, and the hospital wants its money and the banker wants to clear the existing notes before lending money for next spring's planting or feeder stock?
Do you think anybody not getting their "fair share" in cash and immediately will be bitter and make it harder on your kids and your spouse?
A no charge no obligation conversation with your farm insurer's broker who'll tell you about the actual behavior of otherwise truly pleasant people, can be a shock.
Will there be sufficient money flow to pay down the non-farm successors, the bank, etc. And pay your successors and key staff to run the place and still have revenue security for the remainder of your dependent family?
If it turns out that either there isn't anyone in the family who can run the place, or the kids can't work together, or there is not enough money to pay them off and still continue to farm, then maybe you'd be far better off just sell the place.
The only question is who will set the price and the terms and whether your folks will receive the greatest value for your years of hard work.
There is one way to ensure in advance that your interests are shielded, a Buy & Sell Agreement.
Farm insurance agents have arm tons of sample agreements and access to the most creative minds around who will think about your. Situation, what's necessary to you, and help you and your folks create a process which will insure that the conditions of the agreement will remain and the farm and your family's security will be protected.
Remember, this is a business and farm succession planning is a duty if you would like it to be successful after you are gone.
You actually have to begin or merely an today.
What I am saying is that you most likely have very little cash that's not going to be wanted to run the farm and all of your other assets are being used by the farm to generate revenue.
So what will happen to your family, your partners, your family members, and even the farm itself when you die, prematurely of course.
Whether or not everything you, and maybe your parents before you, created will come apart or not will be the results of the plans you are making today.
Naturally every situation is unique, however there are only three possible options available to you when making your farm's plans for the future.
One possibility is to simply sell the place, liquidate the assets by selling everything individually. You've been to dozens of farm sales so you know what I mean.
Selling the farm one asset at a time, the sale strategy, will only return you a couple of pennies on the dollar for all of the assets, except maybe the prime farmland or the development-ready land you own. Mull it over, when you go to a farm auction do you go there to see just how much money you can pay for something? Of course not, and neither will your neighbours when they come to your family's sale.
Another choice is to sell the whole operation as a going concern. An illustrative example of this would be a fair-market sale to a neighbor's boy or to the farmer down the line.
The final option, the most popular option for most farmers of my experience is to pass the farm business to the next generation, a son or daughter, along with their partner and non-farm successors, so that the farm can continue on as it has for generations.
Passing down the farm is everybody's dream, having the business carried on by a son or daughter with mom and dad on the front porch watching over them, or perhaps on a cruise checking the web cam pop set up in the barn so he'll still check on the milking from half way around the planet.
These are some of the critical questions included in our new farm succession tool-kit, questions that demand answers before serious steps towards the ultimate transition of the farm ought to be taken.
Can your children run the place? Will your banker and trade creditors trust their judgement if you're not there to back up their calls?
What about your key workers, will they stick around and work for your successor or will they take off directly after the funeral? How do you know? Can they work for your children?
For that matter can your youngsters work together? What if there is just one inheritor on the farm and all the rest have no interest in running the company, just in getting their "fair share" of the inheritance?
Can you see any Problems here? Is it feasible the heirs will need their inheritance simultaneously the government wants its taxes, and the hospital wants its money and the banker wants to clear the existing notes before lending money for next spring's planting or feeder stock?
Do you think anybody not getting their "fair share" in cash and immediately will be bitter and make it harder on your kids and your spouse?
A no charge no obligation conversation with your farm insurer's broker who'll tell you about the actual behavior of otherwise truly pleasant people, can be a shock.
Will there be sufficient money flow to pay down the non-farm successors, the bank, etc. And pay your successors and key staff to run the place and still have revenue security for the remainder of your dependent family?
If it turns out that either there isn't anyone in the family who can run the place, or the kids can't work together, or there is not enough money to pay them off and still continue to farm, then maybe you'd be far better off just sell the place.
The only question is who will set the price and the terms and whether your folks will receive the greatest value for your years of hard work.
There is one way to ensure in advance that your interests are shielded, a Buy & Sell Agreement.
Farm insurance agents have arm tons of sample agreements and access to the most creative minds around who will think about your. Situation, what's necessary to you, and help you and your folks create a process which will insure that the conditions of the agreement will remain and the farm and your family's security will be protected.
Remember, this is a business and farm succession planning is a duty if you would like it to be successful after you are gone.
You actually have to begin or merely an today.
About the Author:
The ideal farm succession planning process is one consisting of a grouping of industry peers who will meet with you frequently in a farm estate planning mastermind group to help you identify what's important, explain your and your families expectations and assist you with the elemental choices you need to make both today and in the future. And if you are like most successful farmers you know that an nc farm bureau insurance agent is one of your key farm succession planning counsellors.
No comments:
Post a Comment