managing for today and tomorrow succession, business, estate, and retirement planning for farm and...

Managing for Today and TomorrowSuccession, Business, Estate, and Retirement Planning for Farm and Ranch Women

Managing for Today and Tomorrow

Succession Planning

Part Three

Analyze Your Situation


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


SWOT Analysis

• Evaluate – Strengths– Weaknesses– Opportunities– Threats

• Explore– Insights into your

business– Decisions points– New ideas from

family, partners and advisors


Risk ProfilesYoung

• 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


Death

Divorce

Disability

Disagreement

Disaster

The 5 D’s by GenerationYOUNG MATURE


Techniques to Manage Risk

• Avoid• Reduce• Retain• Shift• Self Insure


• 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


Frequency of Events

Seve

rity

of Im

pact

Few Many

Low

Hig

h

Avoid

Retain

Self Insure

Reduce

Retain

Self Insure

Reduce

Shift


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


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


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


Checking Your ProgressAt 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?

managing for today and tomorrow succession, business, estate, and retirement planning for farm and...

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