Transition Planning: Start today with this question
Talking about family farm transition planning can be tough. Some families procrastinate on the conversation or avoid it all together because it is hard to know where to even start. But there is one question that you can ask yourself and those involved in your dairy farming business to get the ball rolling and gain momentum on one of the most critical conversations for your business, your family and your legacy.
In this week’s Uplevel Dairy Podcast, Jay Joy from Bridgeforth LLP puts on his family business advisor hat and leads off with this question that cuts straight to the heart of the discussion:
“If (owner/decision maker) died tomorrow, what would happen to the business and the family?”
Jay encourages you to fill in the blank with the name of the leader, owner or go-to person in your own family, and to then break down that answer into two categories: business ownership and day-to-day management.
Business ownership transition
Take a quick inventory of the business assets: cattle, equipment, farmland, buildings and other property. Who legally owns these assets right now? In the event of a death, will ownership be triggered to transfer to someone else? Even if the answer is “yes,” there are still a few more key points to consider regarding the risk of tax liability, maintaining the relationship with the lending institution and naming a successor for handling the financial and business decisions:
What are the tax liabilities of transferred assets?
How will you continue to access capital?
What triggers buy-sell agreements?
How will big decisions made going forward?
Farm management succession
Even in the face of a tragic loss, a dairy farm has to keep running. Cows need to get milked and fed, people need to be paid and operational decisions must be made. Who is next in line to take on the tasks of leading the farm, approving decisions and stepping into the existing relationships with vendors and suppliers? Answer these three questions to give clarity to what that leadership change would look like:
Direction: Who is the next decision maker?
Approval: Who approves decisions?
Relationships: Who is the primary contact going forward?
Answering these questions can be the first step in the transition planning conversation. If you are able to answer them easily, you’ve already done the hardest part and can move onto the next step in the process of formalizing a transition and succession plan. But if these questions have you stumped, you are not alone and it’s okay. It may be helpful to have someone from outside the family lead the conversations.
Reach out to Jay Joy and his advisor team at Bridgeforth LLP.
785-275-2772
