Dakota Farmer

Estate Planning: Every farming family should schedule a consultation with a qualified business succession lawyer.

July 13, 2016

4 Min Read

Many family business owners — farmers included — would rather work in their business than on their business, particularly when it comes to succession planning. It is easier to do what you know and are successful at than to address and plan for decisions that become important at some point down the road. But how long is that road? At what point will it be too late to make those decisions that greatly affect your business and, more importantly, your family?

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Every prudent farming family should schedule a consultation with a qualified business succession lawyer so that they can begin discussions on how to keep their family a family and their farm a farm. Waiting until they "have time" or "have it all figured out" is like that overdue vacation that never gets scheduled, and there is a lot more at stake than missing out on some fun in the sun.

When you don’t have a plan, it’s easy to delay planning. So let’s start with a plan.

1. Maintain what matters. Many family businesses wait until the point of communication breakdown before they schedule a time to discuss a logical and achievable plan of succession. Sometimes they come in after months or years of uncertainty and upset expectations in terms of compensation, work expectations and ownership transition — and the list can go on. Most people would agree it is necessary to do proper maintenance on your car, machinery and equipment. You don't want to keep using and abusing the very things you need to function in life and on the farm. The same goes for relationships. Recognize the importance of maintaining the close relationships in your life, and commit to making decisions and taking the necessary actions to preserve them.

2. Commit the time. Set aside a few days a year, or a day each quarter to work with your planning team on what is the proper succession plan given where you are at in the operations. You don't have to obligate yourself to transferring ownership too soon, but do begin the thought process. Your planning team is typically led by an estate planning and business succession attorney. Having an attorney who focuses on agricultural estate planning and who understands how a farm functions is invaluable. Your certified public accountant, insurance specialist and financial planner are also vital to the team.

3. Create the right foundation. Many farmers or business owners think they have to have their farm or business succession plan in place before they do their estate plan. Nothing could be further from the truth. Uncertainty with the distribution of an estate will cause uncertainty in business, whether a business succession plan is in place or not. Put the estate plan foundation in place, and then continue to work on the business succession component of that plan. When you are still figuring out who, when and how the operations will transfer, you can include options within your estate plan that are revocable. You can change those options as your business or farm succession plan becomes clearer to you.

4. Consult confidentially. While there are exceptions to this general rule, typically in the initial stages of discussion the owners of the operation should consult privately with the attorney. The input of other planning team members is essential once the initial conversations and plans have been developed. The attorney-client privilege provides the confidential forum for the owners to be very open about their hopes, their fears and their goals. That privilege is only maintained, however, if it is not broken by the presence of a third party. If the owners personally engage the attorney (as opposed to the business entity or farm corporation hiring the attorney), the individual is the client and the consultations are confidential. If the business entity hires the attorney, and there are multiple shareholders, the corporation is the client, and conversations with the attorney can potentially be discovered by any of the shareholders as they relate to the corporation.

5. Put the plan in action. It all begins with a phone call. Schedule that conversation with your planning team or a key member of your team. Once the meeting is set, the process will begin. Take it one step at a time, and allow the business succession attorney to help you determine your goals and what legacy looks like for you. As those goals become clear, the path to get there will as well. It all starts with a plan.

Thompson is the founder of Thompson Law, P.C., an estate and business planning legal services firm in Sioux Falls, S.D. Her practice focuses on agricultural estate planning and business planning. She is a member of the American Academy of Estate Planning Attorneys, an exclusive national organization dedicated to estate planning attorneys. She has been practicing law for 20 years and is licensed in South Dakota, North Dakota, Minnesota and Iowa. See cathompsonlaw.com or call 605-362-9100.

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