Family Business Matters       06/18 04:59

   Your Pre-Succession Checklist

   Succession is often narrowly framed as the movement of assets to the next 
generation. While such planning is important, there are nonfinancial issues, 
also, to consider.

Lance Woodbury
DTN Farm Business Adviser

   Succession is often narrowly framed as the movement of assets like land and 
equipment to the next generation. Advisers focus on gifting and or selling 
equipment to the next generation while avoiding tax consequences, or they limit 
discussion to the liquidity needed to buy out off-farm siblings. They propose 
different kinds of trusts, gifting plans, insurance policies and entity 
structures to minimize taxes and protect assets.

   While such planning is important, there is more to it than just the movement 
of assets. Discussing the following nonfinancial issues can grease the wheels 
of a successful ownership transition.

   A VISION FOR YOUR LIFE'S NEXT CHAPTER

   One factor in a successful transition is the senior generation's focus on 
its future. Specifically, what happens after you step into a less-prominent 
farm role? Will you be on the farm or ranch working in an employee capacity to 
support the younger generation's leadership? Do you have emotionally fulfilling 
activities away from the farm? Will you live on the farm or in town, and how 
will you spend your days? Without a vision for what's next, the senior 
generation risks feeling lost and depressed during and after the transition.

   YOUR ABILITY TO LET GO

   Closely related to a vision for your future is your psychological ability to 
let go of daily tasks. If your vocational identity -- what you do -- is tied up 
in the daily accomplishment of farm or ranch activities, and you must still 
instruct, guide or manage daily to feel a sense of accomplishment, it will be 
difficult for the next generation to be excited about taking over. Most leaders 
want to feel a sense of autonomy, that they have control over their work. 
Frustration ensues when the senior generation is not ready to let go and jumps 
in the middle of the daily to-do list, yet still talks about the importance of 
succession planning.

   AGREEMENT WITH YOUR SPOUSE

   An often undiscussed issue is whether Mom and Dad agree on aspects of the 
handoff. Succession-planning efforts can stall because the parents are not in 
agreement about the principles of the financial and management transition. 
Maybe one parent is still highly involved in the business, and the other parent 
is ready to retire. Or, there is a lack of agreement about the timing or 
amounts of financial gifts. When parents don't agree on the basic tenants of a 
succession plan, it stymies the advisers and stalls the whole transition effort.

   THE NEXT GENERATION'S SKILLS

   It is hard to admit that your kids do not yet have the skills to manage the 
business and even harder to acknowledge that your kids may not be the best 
leaders for the future. If they do have the ability but are not yet ready, work 
with them to develop a plan to gain knowledge and experience. If a non-family 
leader is needed, or if you need to brainstorm alternatives to family 
ownership, start those discussions early, as implementation often takes several 
years.

   THE NEXT GENERATION'S RELATIONSHIPS

   If the next generation does not work well together, you may be setting the 
stage for future legal battles by trying to keep the assets tied together, 
which minimizing taxes often requires. Engage in honest dialogue about how your 
adult children will own and manage assets together. Through careful planning, 
you can develop strategies that don't tie the financial fates of your heirs 
together. But, it requires admitting and planning around the lack of working 
relationships, which is often difficult for parents to acknowledge.

   Planning for the legal and tax aspects of a transition is important, but 
there are other issues that can help -- or harm -- your succession and estate 
plan. Considering them will help set the stage for your successful planning 
process.

   Lance Woodbury can be reached at lance.woodbury@pinionglobal.com   




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