We talk about all kinds of risks in production agriculture. One could say that most everything a producer does is involved with managing risk of one kind or the other. In a transition planning process we need the successor generation to acknowledge additional risk.
In my upcoming session at the Farm Futures Business Summit 2016 in Saint Louis in January, we will touch on five things you need to start farm succession planning: Lifetime income, successor preparation, managed health risk, managed successor's risk, and fairness to heirs.
The fourth is to understand and manage the risks of the successor generation.
As the successor generation assumes control of the operation, they need to consider a couple categories of risk that could stop the transition process cold.
1. What happens to the game plan if the primary operator becomes injured and can't work? A long-term disability strategy can provide funds to keep the business alive while the successor owner regains health and returns to work. Or it can help create time to identify a new successor to replace the disabled party.
2. What documents are in place to allow decisions to be made in the event of the incapacity of the successor manager? Whether is temporary or permanent incapacity, proper documents allows others in the operation to make needed decisions and take action while the successor manager is out of the picture.
3. What happens if the successor owner, or her spouse, dies prematurely? Do they have a solid buy-sell agreement to provide for successor ownership? How much additional living expenses will the family have as a single-parent household?
At the Summit we will talk about all of this and leave plenty of time to answer your questions. I sure hope you can join us.
If this blog has got you thinking about your own situation, get in touch with my office (firstname.lastname@example.org).
Investing in a knowledgeable advisor and thinking about answers to key questions before putting pen to paper can make creating a farm estate plan much less complicated. Use the Penton Agriculture free report, Farm succession planning: Customizing a farm estate plan to get started on your own plan.
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.