Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Managing for Today and Tomorrow
Succession Planning
Part Three
Analyze Your Situation
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Three Important Considerations
• SWOT Analysis
– Strengths, Weaknesses, Opportunities and Threats
• Risk and Barriers to Succession
– The 5 D’s : Death, Disagreement, Divorce, Disaster, and
Disability
• Fair vs. Equal
– Valuing contributions and determining priorities for
off-farm and on-farm heirs or other business partners
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
SWOT Analysis
• Evaluate
– Strengths
– Weaknesses
– Opportunities
– Threats
• Explore
– Insights into your
business
– Decisions points
– New ideas from
family, partners and
advisors
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Risk Profiles
Young
•
•
•
•
•
ambitious
low experience
new ideas
no time horizon
time to recover
from mistakes
• have little to lose
Mature
•
•
•
•
risk conscientious
lots of experience
established style
sees a horizon with
a setting sun
• little or no time to
recover if losses
occur
• have a lot to lose
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
The 5 D’s by Generation
YOUNG
Death
Divorce
Disability
Disagreement
Disaster
MATURE
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Techniques to Manage Risk
•
•
•
•
•
Avoid
Reduce
Retain
Shift
Self Insure
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
• Insurance
–
–
–
–
Liability/peril
Life
Disability
Crop & Livestock Insurance
• Contracts
–
–
–
–
–
Leases
Production agreements
Prenuptials
Market sales contracts
Estate & retirement plans
• Asset Management
– How property is titled
• Communications
– Between family
members/generations
– Business associates
• Modified behaviors
– Business vs lifestyle
– Separating business
and family life
• Financial records
–
–
–
–
Balance sheet
Cash flow
Income statement
Emergency cash funds
Managing for Today and Tomorrow
Low
Severity of Impact
High
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Shift
Avoid
Retain
Retain
Self Insure
Self Insure
Reduce
Reduce
Few
Many
Frequency of Events
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Fair vs. Equal
• Issues of fairness
• One perspective on fair vs. equal
• Wills
• Understand how assets are transferred in probate
• Identify farm or ranch heirs/managers/partners
• Develop a succession plan
• Put the succession plan into action
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Tools to Increase Fairness
• Life Insurance
– Its affordable, life insurance is purchased for off-farm
heirs
– On-farm heirs purchase life insurance on parents’
lives for buying out siblings
• Partnership, LLC, Corporation
– On-farm heir controls/manages the operation
– All siblings share ownership
– Operating entity owned by on-farm heir and land
entity owned by all heirs
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Tools to Increase Fairness
• Off farm heirs understand and agree to inherit
less, in order to transition a viable farm or ranch
business
• Shared appreciation agreement
– If the on-farm heir sells real estate within a specified
time, off-farm heirs share in appreciation
• Real Estate divided
– Long term leases
– On farm heir has first right of refusal if off-farm
heirs sell
Managing for Today and Tomorrow
Succession, Business, Estate, and Retirement Planning for Farm and Ranch Women
Checking Your Progress
At this point can you answer yes to the following
questions?
• Are the parents or older generation ready for a partner?
• Is the child or non-related younger generation
committed to farming?
• Is the business large enough?
• Can you live and work together?
• Are the non farming children supportive?