Will your dairy farm business transfer to the next generation?
Business succession planning will help transfer those assets. The process requires a team of professionals such as a tax specialist, attorney, financial planner, and lender. Farmers can make this time with professionals more worthwhile and lead to better outcomes by doing homework.
Here are 10 things farms can do as they prepare for eventual succession planning. A facilitator can help keep everyone on track and accountable when working through these steps.
1. Organize your information
- What do you own and owe?
- How do you own it? Gather depreciation schedules, insurance policies, retirement accounts, savings, and other assets.
2. Determine your priorities and intentions
- Is it important for the business to continue?
- Do you want it to provide a dignified retirement for the owner generation?
- Is it important to keep the land in the family?
3. Evaluate your communication
- Are you a good listener?
- Have you had a conversation with partners, family, and successors about succession?
- Have you named unresolved conflicts and worked toward addressing them?
- Are you communicating as partners?
4. Analyze the financials
- What are the liquidity and solvency positions of the farm?
- Has it been profitable?
- Does it cash flow?
5. Family living needs for the next phase in life
- What are your current needs?
- What do you need from the business assets in the future?
6. Management transition plan
- Is the owner generation ready to relinquish responsibilities?
- Is the successor generation prepared to assume those?
- Has there been a specific conversation about transitioning management?
- Is the owner generation emotionally prepared to let go?
- Have you established a timeline for initiating the plan and when it will be completed?
8. Estate plan
- Is there a written plan to get assets where you want them?
- Have you nominated a guardian for your minor children?
- Do you have Powers of Attorney for Finance and Health Care in place?
9. Fair versus equal
- Has a successor contributed to the owner’s business with a plan to compensate them with farm assets in the future?
- Is this plan in writing?
- Does the goal of continuing the farm outweigh equal division of assets?
10. Long-term care needs
- Have you researched the options of long-term care?
- Do you understand the Medicaid eligibility and recovery rules in your state?
- Can you develop a plan to age in place?