Sometimes, you don't have much time. What info do you absolutely need to get started?
Written for Farm Futures and initially published in their March/April 2024 issue.
Planning a transition plan over several years is not always possible. Sometimes a sudden event moves the transition planning from “someday” to an urgent “right now.” How do you begin?
Transition planning, even under the best of circumstances, is not easy. Throw in a sudden death or other family event, and the process is even more dire. Successful transition plans all have one thing in common. The family follows a process. While no single process serves every family; what we will discuss below can help every family get started on short notice.
Whether you plan to use a transition specialist or not, you need the following information to get started.
Who Owns What?
This is a strictly legal question of who owns the land, cattle, equipment, etc. What legal documents support this? Often, these documents are reviewed once at the law office during the signing and never looked at again. Legal documents you will want to locate are buy/sell agreements, articles of incorporation, partnership agreements, bylaws, meeting minutes, stock certificates, and articles of organization.
Who Knows What?
It is likely that many family members are in the dark about ownership, daily operations, and other items but are craving clarity. Often, one generation has more information than another, and lopsided knowledge of ownership and the business will breed mistrust unless it is shared. The sooner there is open sharing of business information, the smoother the process becomes.
Who Does What?
What are the current roles and responsibilities of the family as they work together? This is something that, as a transition advisor, I need to know to assist the family. What roles does everyone play? What are the work roles? How does the family role intersect with the business? Is there a peaceful overlap of family and business, or are there unresolved issues? Most importantly, is everyone’s role clear to themselves and clear to everyone else? Note: there may also be non-family advisors and key employees with key roles.
What’s Locked in and What’s Flexible?
Thinking back to the ownership question, is everything carved in stone via entities (think trusts, owner agreements), or is there flexibility around what can happen next? Some folks really do want to run their farms from the grave and there is not much flexibility for subsequent generations. Unfortunately, some family members are forced into becoming business partners, even if they would never voluntarily enter into such an arrangement. Understanding what can be adjusted and what cannot be adjusted is something that needs to be understood early on.
Think long and hard about tackling this process alone, especially if your farm is under the stress of a short timeline. I am currently working with a farm that went through several deaths and divorces in rapid succession. They made it through the turbulent times and are coming out stronger on the other side. They beat very high odds, but the transition was almost too much to deal with while running a farm at the same time.
When a farm family has a sudden death or event that forces the transition planning to start, there is often paralysis and plenty of anxiety about what to do first. It is easy and natural to become paralyzed. Looking back over what should have been done will not solve the problem of what to do first. But, getting the facts on the table and opening up communication is a great first step in keeping the farm and family thriving into another generation.