subject: Who Needs A Farm Succession Planning Consultant And Why Or Why Not? [print this page] According to the results of a recent survey, most family-owned farms need help if they are to succeed beyond the current senior generation of owners. This is primarily because of farm succession planning or actually the lack of it.
Without help these farmers will do what they've done in the past, nothing until it was too late, put it off long enough to take away the value of the decisions they should be making now, or resort to the tactics of the 1950's - something guaranteed to stop any momentum the farm has in its tracks.
Farm succession planning is critical to the long term survival of the farm because it unlocks cash from the business for the departing generation of owners and creates an environment where the next generation can begin taking over.
Who are you going to rely on to provide the help you need? This is the most important decision you will ever have to make when it comes to your long term future. The success of the farm for future generations depends on it. 100% of the farms in the survey said that the continued involvement of family members in managing the farm was critically important to maximize the value of the business and make the most of the sacrifices it took to get it to where it is today.
After all, the owners of family owned farms often have virtually all of their assets tied up directly or indirectly in it, so they want folks who are committed stewards of their years of hard work. Nevertheless, 61% said that they had spent little time on succession planning, possibly confusing succession planning with estate planing, something everyone seems to put off too long.
Even farmers that planned to retire within the next seven years were unsure exactly how their next generation successors would actually take over complete management after they retired. A major advantage of making your farm succession decisions today, beyond the time it will take to make sure the next generation is up to speed and ready to seamlessly take over, is the power of compound interest.
This power of compound interest is critical, you lose it when you wait too long to make the decisions that need to be made. Instead you give the power to the bank and the government, taking it away from everybody else. Gifts made today, perhaps decades before the recipients would have received them as their inheritance, will be worth many many times more than they would have been if you waited to make them.
Imagine the value of giving one of your recently married children $10,000 to help them buy a house. How much will the value of that gift become over the next twenty years - while you are here to watch? This is just one example of combining your farm's long term interest and that of an off farm heir. At the same time what will be the value to your next generation of farmers in that scenario? They won't have to buy back their brother or sister's interest at its value two decades from now.
Passing along the growth in value to your successors is another way to reduce, delay, maybe even eliminate tens of thousands of dollars of unnecessary asset draining costs. Farm succession planning involves aligning the visions of the senior generation owners, the non-farm heirs, and those folks who will own and manage the farm in the next generation.
Seeing the big picture is often difficult. What you need is a series of emotion neutral questions for every member of the family. Questions calling for decisions from everyone. Do you need a professional adviser or consultant to take you and your family through these questions? Maybe that works for you. If so what you need are the right questions to ask them, so you can make sure they ask them of your family members.
Knowing the questions that should be asked by your advisers and making sure they know you know them will keep them from settling on strategies and tactics the last worked well fifty years ago. Maybe you really don't need or want a consultant or other expert to ask the important questions that need asking and wait patiently for the answers.
Perhaps one of your family members can take on this role, leaving it to your advisors to take the picture of your farm and family these answers help create, a picture of what you all want the farm to look like in the future, and then create the documents that will make it happen.
Your farm's success will be determined which approach you choose, do something and create the future or do noting and let the family deal with whatever comes their way.
