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Family Business Matters 11/09 08:36
The First Next Step
Focus on efforts that work in combination to help create a comprehensive
estate plan.
By Lance Woodbury
DTN Farm Business Adviser
Figuring out the future is hard work. Whether you are crafting an estate
plan, trying to improve family relationships, transitioning management of the
business or making changes to how you operate, you face seemingly
insurmountable challenges.
Think about your neighbors: Stories abound of land split to the point of
inoperability, of families ripped apart by disagreement, of estates sold and
the cash spent within a few years. How do you avoid such consequences?
KNOW YOUR OBSTACLES
The best way to avoid some of these undesirable consequences is to come to
two realizations and take two actions.
The first realization is that the difficulties you face are not static, they
are always in motion. The business continues to evolve, relationships change
and markets move up and down; your solutions may need to evolve and adapt, too.
The second realization to come to is that the challenges you face can be
enormously complex. For example, estate planning, or the process of
transferring ownership of your assets to others, requires expertise from at
least two, and often three, distinct professions: legal, tax and insurance.
More wealth, particularly in the form of land, often requires more
strategies to mitigate financial consequences. Equity in your equipment,
livestock and being "land rich but cash poor" in a capital-intensive industry
introduces all kinds of hurdles when considering how to pass your assets to
your children and the charities you care about.
PLANNING AND COMMUNICATION
The first action you should take is to start the planning process. Some
people are hesitant to plan because they fear doing something now will create
more conflict during the process: "Better to let others figure it out later"
than to make things worse in the present. What I tell them is that leaving the
future to chance has even greater odds of producing chaos, while addressing
plans now gives us the time -- if there is going to be conflict -- to work on
reconciliation.
The second action is to improve communication. If you don't want family
members fighting each other over their inheritance, you need to pay attention
to communication. How people talk about the future is just as important as what
they talk about. Preventing or clarifying assumptions that family members may
hold, deciding how to include spouses or in-laws, avoiding fights and keeping
the discussion productive are challenges that test even the best mediators.
BENEFITS OF GOALS
To sustain your energy when dealing with obstacles, it is helpful to
identify, and frequently recall, not just your goals but also the reasons why
those goals are important.
For example, establishing a legal entity to hold farm or ranch property may
seem complex, but the purpose is to give future generations a chance to farm an
economically viable parcel of land. Or, having a series of family meetings may
create short-term awkwardness among family members, but the purpose is to
prevent misunderstandings and more serious conflict in later years. As you
write down each of your goals for the future, be sure to ask the question, "Why
is this goal important to me?"
DECIDE ON A FIRST NEXT STEP
To achieve progress, focus on a specific "next step" that needs to occur.
Like harvesting or planting crops, or building a herd of animals, the key is to
focus on getting started and working consistently over time. That "next step"
in your planning might simply be a meeting with your CPA, having a conversation
with a family member, having your attorney draft a will or getting a fair
market value balance sheet. The point is to keep moving, working on the
activities that, when taken together, form a comprehensive plan.
If you understand the obstacles, recall why your goals are important and
stay accountable to forward movement, your winter months have the chance of
yielding even a better harvest than the fall.
**
Editor's Note: Write Lance Woodbury at Family Business Matters, 2204
Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email lance@agprogress.com.
(AG)
Copyright 2018 DTN/The Progressive Farmer. All rights reserved.
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