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Poll: Biggest barrier to farm succession planning?

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17 Replies
Senior Advisor

Re: Poll: Biggest barrier to farm succession planning?

John, I think the biggest barrier to succession planning is procrastination. Perhaps the recognition of our own mortality is not something we are eager to face.

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Senior Advisor

Re: Poll: Biggest barrier to farm succession planning?

I agree that the biggest barrier is procrastination, but I think the problem is making the decisions about what is "fair" and what is "equal" and, ultimately, what is "right".  It gets very difficult.

I'm almost certainly not passing my farm on, but I have a special needs child and it makes estate planning infinitely more complicated.

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Honored Advisor

Re: Poll: Biggest barrier to farm succession planning?

In most cases, I would agree.  We faced over a decade ago, in our mid-forties, and formed an estate plan that fit the family very well then. 

Maybe it's easier to do when you are younger, and death seems more of a far-distant event.  Quite honestly, I have a harder time contemplating it - or even retirement - now.  

I try to keep codicils to the wills made when we add property.  Need to contact the estate attorney and do one now, but need to settle a minor partition suit first, to remove a co-owner who cannot remember to send me the tax bills on time, much less pay her share.  

I just do not drag out bad relationships - personal or business -  anymore...the difference in me in my forties and me in my fifties.   This is part of my newer/older mindset, too...to leave no hanging threads for Mike and the kids to have to unravel. 

I checked "too many distractions," but only because it was the closest to "other."  What is really bugging me right now is a couple of things.  First, the flux in the estate tax laws.  Our estate attorney sent a four-page letter last week, outlining the changes, what may or may not benefit clients, etc., and also that part of the code may be attacked retroactively.  Oh, and Congress could always change its mind....DUH!

How do you make a good plan when the government has that sort  of a split personality?  If you died in the next year or two, there are some serious question marks down the pike. 

Our basic estate plan is okay, although we may need to tweak it...but, I'd like to know the final rules before hiring counsel at $250 an hour or more.  Figured I'd talk with him more in detail when the partition is done, and the codicils need to be written, which should be by June at latest, I think. 

Second, I get really confused when I try to figure out our best exit point from active farm involvement...that is, when the economy took its swan dive in 2008 and since, a lot of the normal assumptons used in financial planning got gutted.   Up turned into down for a while there.  Hard to plan for 10 years from now, when the experts' best guesses get "iffy" every ten minutes. 

Then, too, the unprecedented rises in land prices make for some unusual opportunities/challenges in both succession and estate planning.  I think we will have to look for a bit more life insurance,  which is our main balancing tool between farming kids and non-farming ones.  I'd say that may need to go into place in the next two years, to be safe and affordable.   

This all touches on the article Cheryl Tevis did on being "caught in the middle," which we discussed a little bit on the women's board, too.  I think a lot of families do not confront the choices that have to be made in succession and estate planning, since it can raise a lot of feelings.  Feelings can get messy. 

Another "middle" issue is that many of us in our fifties face is that our parents are still very much alive and retain ownership of major farming assets...and some have adult kids coming on, chomping at the bit for their turn.  How do 50-somethings provide for succession, when they haven't really got control of those assets?   

You cannot leave what you do not yet own...and that is a big concern in some of the families on the landscape today.   Extended lifespans in hte Greatest Generation are presenting new questions for  Baby Boomers.  This is sort of a novel situation, societally, and has no set of rules or traditions to assist in guiding families to make all the transitions...it's almost like considering Prince Charles and his chances of being King. 

A final concern, which is a fairly mature factor in hog farming - but which provide significant pressure on all of ag eventually, if EPA doesn't get severely hamstrung - is the regualtory impact on farming. As a friend of mine, who is retured from NCDA, says:  In any successful farming family, one person has to deal with the world, so everyone else can produce. 

I know that I have to be totally hands-on our hog farm's permit, even though Mike, our daughter, and SIL are all certified manure system operators.  They will all tell you that there are interpretations of parts of that seminal element of our operation that they would have to hire a New York lawyer for, if not for me.  (At least I know I am needed.)

Ditto for the intricacies of securing workers' comp, liability coverage, and other legal/financial issues.  Risk management is a pretty intensive job, and I doubtit will get any easier as time goes one.  

This is the stuff that has the power to wake me out of a sound sleep at night....

Passing that duty along requires a more extensive internship than we've provided for our daughter to date.  She's great on production, and will be equally good at this someday...I just can't bring myself to pile this on her young shoulders yet...

So, "Other." 

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Honored Advisor

Re: Poll: Biggest barrier to farm succession planning?

Jim, that whole fair.equal thing is impossible to get right, I think. 

I have an aunt who had two sons, very privileged due to good family busineses(not farming.)  I never heard of anything they wanted that they even had to wait to get.

She was so obsessed with everything being fair AND equal, she would give exactly the same $ value for every occasion, wrapped in exactly the same number of packages.  This meant she would even wrap separate sticks of gum to even things to the penny, if necessary.  

For all of that, one brother ended up buying intothe family business, while the other went away to college and to follow another career.  When that lost its luster, he came back and hired onto the business to his baby brother.  I have never seen an unhappier man in my life, nor a more resentful one.  Got so I hated to go around and hear it. 

So, you can stand on your head to make them think it's all fair, but there can still be problems. 

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Senior Advisor

Re: Poll: Biggest barrier to farm succession planning?

In your situation Jim, fair is whatever you decide is fair. I'm betting your other kids are well aware of your concerns and will understand your decisions.

 

Miracle of miracles, My kids do not have a jealous bone in their bodies. They understand the mom and dad will give this grandchild a lift this time and  their kid the next time. There is no score keeping by mom dad or anyone else.

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Senior Contributor

Re: Poll: Biggest barrier to farm succession planning?


@JIM Meade / Iowa City wrote:

I agree that the biggest barrier is procrastination, but I think the problem is making the decisions about what is "fair" and what is "equal" and, ultimately, what is "right".  It gets very difficult.

I'm almost certainly not passing my farm on, but I have a special needs child and it makes estate planning infinitely more complicated.


'Fair' and 'equal' are two different words.

'Right' is what has to be the final decider.

In most families 'equal' is not the best way to go but there is only so much that anyone can do from the grave.

Hopefully all heirs know the reasons that the decisions were made and are able to 'live' with the results.

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Veteran Advisor

Re: Poll: Biggest barrier to farm succession planning?

What's fair today --might not be the case in the future---example gave one beef cows 2 years ago --compared to current---- stock portfolio in 2007 compared to real estate--if one can out guess the future on values of any current asset into the future decade at any spot moment::---ha  --ha---wife and I inherited some things with no monitary value--although are ""priceless in our hearts""--Smiley Wink  

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Honored Advisor

Re: Poll: Biggest barrier to farm succession planning?

As regards what parents want to "say" to their children and what their children actually "hear," I had a very revealing conversation with a friend on this subject just two days ago.  The message is often confused in the translation.

She is a divorcee from another state, and her former husband and two adult sons still reside there.  Something had transpired between her and the older son, over him calling her, her returning the call to his cell phone twice, but the call going to voicemail.  When her DIL finally returned the call, it was from the ladies' room...which in and of itself is very telling. 

Turned out they were out to dinner with the ex-husband when she tried to catch up with them.  He is still, five years later, very negative about her (even though the breakup was due to his infidelity, and her unwillingness to accept it.)  When she finally got a chance to talk with them at length later, she said the son listened and said he understood. 

From the nursing class we had shared last semester, she said she instinctively asked him to do what we call a "repeat demonstration."   That is, when nurses teach a patient, they ask them to either repeat back what they have been taught about their ongoing care, or show how to perform the procedure they will need to practice in taking care of themsevels when they leave the care setting.

What shocked her was how totally skewed his understanding was when he repeated the message back to her...he didn't "hear" what she "said" at all.  Maybe - I think truly - this is what happens a lot of times with what we mean by our wills and what our children take from our bequests to them. 

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Veteran Advisor

Producing a qualified successor

Passing down substantial assets now should be simple, you don't even need a plan anymore with the new $10 million dollar estate and gift tax exemptions, unless you are "filthy rich".  Just have to watch out for a state like Minnesota unitl our new republican legislatures get the house in order and increase the state threhold from $1million to mirror the new federal exemptions. Until then, you need to make the transfers as gifts, five years before you croak.

 

The real problem arises, if succession is what is desired, in finding children or other heirs that have the ability to run and grow a business. If all your kids are going to do with farms and businesses is to milk the profits out of them, maybe they should be left to a charity. I don't think giving a child unearned wealth is doing them any favor. Just look at the products of family fortunes in America and how their lives turn out.

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