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June 14, 2016
Estate planning is one of those things ranchers often put off until the last minute, or worse, until it’s too late. Unfortunately, many ranch businesses don’t survive the transition to the next generation.
Val Farmer for the Farm & Ranch Guide says there are two things a farm or ranch needs to survive.
Farmer writes, “The first reason will be your lifelong ability to build a financially viable farming operation. This will insure enough assets to sustain your retirement, be fair to your non-farming offspring and to transfer your farming assets to your successor(s).
“The second reason is your willingness to groom your successors to be good operators in their own right. The succession and eventual agriculture success of the next generation depends on personal relationships within the family and astute farm management.”
If you haven’t started the daunting task of transition planning, there’s no better time than the present. Heather Gessner, SDSU Extension livestock business management field specialist, offers four tips for breaking down the process and finally tackling your succession plan.
1. Initiate the discussion
Gessner writes, “Communication will be the lead component to successful estate and transition plans, if you are thinking of returning the next generation to the farm. Bringing up hard topics about death, transferring assets, economics, balance sheets, income and expenses and other topics are easy to avoid amid day-to-day discussions about crops or cattle. Opening the door to these topics can lead to the prevention of future problems and disagreement amongst surviving heirs. When everyone is aware of the plan and the reasons behind the decisions that were made, a smooth transition to the next generation can occur.”
2. List your objectives
“Just like a high school basketball team setting a goal of getting to the state tournament and then creating objectives to get there, the family and farm needs to have clear goals for the future,” says Gessner. “The goals and objectives for the farm and family are the directions the estate professionals will use to ensure the correct tools are implemented for each family.”
3. Compile your information
“Information is king, and as it relates to your estate plan, having all of your personal and business information compiled and organized will save time and money,” she says. “Since all assets need to be included in the written plan, a list of land, machinery, stocks, retirement accounts, bank accounts, etc., as well as a list of liens, mortgages and other liabilities needs to be compiled.”
4. Choose professional advisors
Gessner writes, “Your advisors are a critical component to the creation of a successful estate plan and need to work with your best interests in mind. They also need to work with each other to ensure the tools implemented work together to accomplish your goals.
“An estate planning attorney is a critical component for your estate plan. Choosing an individual or firm that works predominately with estate planning and has a working knowledge about agricultural estates is highly recommended. Other advisors may include a tax consultant/preparer, life and/or long term care insurance agent, financial planners, and funeral home director. The team will be unique to the family and the tools utilized to achieve the goals developed.”
Gessner says the task of estate planning can seem less daunting if ranchers simply break down the process into manageable steps. Perhaps this month you and your spouse choose to compile your information and contact your professional advisors. By the end of the summer, you could be ready to include children, grandchildren and other family members in discussions about goals, long-term plans and objectives for the ranch. Once those business meetings have been scheduled, you can begin to work out any kinks and could have your plan finalized by winter.
Delaying the process can lead to your ranch falling apart, family members fighting and the loss of your legacy you’ve worked so hard to achieve.
The opinions of Amanda Radke are not necessarily those of beefmagazine.com or Penton Agriculture.
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