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Planning for 3 partners, 7 successors
By Dr. Donald J. Jonovic
THE PROBLEM: How can
three partners with seven successors get the needed advice to help with the
Problem submitted by V.B., Iowa
My two brothers and I are all in our 60s. We've put together
a large grain operation. We also have hardworking sons (I have three; my
brothers each have two), who will take over.
We can farm thousands of acres, but the problem is we don't
have a clue how to begin the process of transferring this business and all
these assets to our children. (My brothers also each have daughters who live in
other parts of the country.)
Our accountant and attorney have been helpful over the
years, but mostly with business and tax problems. They rarely call us with
suggestions or ideas, and actually they seem to avoid our questions about
planning transition to the boys.
In our 50s, we always thought there was time. Now in our
60s, the future's not so far away anymore. How and where do we start?
Dr. Jonovic's Solution
Lawyers and accountants are key players in the farm
transition process, but these advisers are only part of that team.
Families who farm together seldom qualify for the
Communication Olympics. For many, conversations about the future are about as
common as armadillos in the Arctic. Even successful partnerships are burdened
with confusion, tensions, misunderstandings, and resentments. Goals are unclear
and often conflict.
Building a transition bridge from A to B is difficult if
there's only hazy agreement on the starting point and little, if any, agreement
on the end point.
Legal and accounting advisers can design and build the
bridge, but first they have to know important variables like the starting point
(people, assets, cash flow, organization), the end point (retirement dates,
growth plans, objectives for off-farm heirs), and what the structure will have
to bear (capital needs, financing, compensation).
These are the kinds of family and business questions legal
and accounting training don't prepare such advisers to answer for their
clients. For that, a hybrid approach is almost always best.
Over the past few decades, specialists have evolved who
focus on helping families and partners unclog communication and wend through
the predecisions. Their approach can demonstrate to V.B. and others how to work
with all advisers effectively.
Typically, transition specialists begin with a deep dive
into the fundamentals of both family and business. They review the
organization, the P&L, and balance sheet. There are interviews with each
family member and key employee to uncover patterns of shared and competing
goals, points of conflict, strengths, and weaknesses.
These advisers then work with the owners and family to
define that elusive transition goal (point B), so that the bridge builders -- the lawyers and accountants -- can join everyone at the table to determine how
best to apply steel and concrete to the plan.
Although these new specialists are still few and far
between, they can be found. Failing that, the traditional advisers and families
in transition can still use the approach of these specialists to do the
analysis and predesign work -- defining what exists today and what the goals
are -- in order to apply estate and tax laws efficiently toward that end.
Designing a farm transition is often so daunting to families
because it seems to begin as little more than a bridge to nowhere.