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Aha Moments in Succession Planning

Family business attorney Julie Bogle had a longtime client who, among all the business and legal matters, resisted all attempts to talk about transition planning. Yet, Bogle knew there were several children and no plan was in place for the large-scale operation. Then, in one work session, the client casually referred to his home farm. Bogle followed up by asking how, exactly, had he come to acquire his many additional pieces of land. 

He explained that, over the years, every time he knew a farm was coming up for sale and there was no heir or anyone else set to take over, he’d be sure to be there to buy it.  

“In that moment, I believe he really heard himself. There was a shift in his perspective as he realized his farm was in that very predicament,” says Bogle. “We both knew then he was ready to look at some estate-planning options.” 

She explains that when there’s no transition plan, heirs can start fighting. Some want to cash out; some want to keep farming. The ones who want to keep farming need to buy the land from their siblings who wish to cash out, but there often isn’t enough cash or financing available to do that.

“Someone  – like my client – can swoop in and purchase. This leaves those who wanted to continue farming with a job – working for someone else – and some cash, but a very bitter taste,” says Bogle. 

If every farm owner had an aha moment – like her client had – before a time of crisis or other forced reckoning, the safety and longevity of more farms could be better ensured.

Don Jonovic, founder of Family Business Management Services, says, in his experience, a surprise realization of the need to plan is mostly – though not always – a first-generation (G1) issue. 

“If a family farm gets past that G1-G2 transition with the business intact, rather than aha moments, families face all sorts of emotional, financial, tax, and dream (or nightmare) reminders of the fact that they need to plan,” Jonovic says. “Too often, even when it’s obvious that there’s a need to plan, these later generations are paralyzed by all the bad (or no) design decisions and their resulting emotional conflicts and distrust.” 

Fear can be one type of paralysis 

To get someone who’s reluctant to plan to open up to taking the first steps, help them discover exactly what they want the most, advises succession consultant Marlene Bradbury of AgCountry Farm Credit Services in Grafton, North Dakota. She gives an example.

“I had a woman in her late 30s come to me who said her dad was insisting on selling his farm to her – immediately. But the daughter, who owned her own farm with her husband, told her dad they’d wanted to discuss the transition options; there were circumstances that made outright purchase of this farm (which was one hour away) less than advantageous. Dad refused. He was done. He wanted out right then,” she says.

After gathering more background, Bradbury suggested to the daughter that perhaps her dad was simply scared. Perhaps the man, who had workaholic tendencies, wasn’t able to clearly envision his role during the transition of bringing the couple in. 

“I also suggested that it could be he also thought if anything went wrong and he wasn’t involved, it wouldn’t be his fault,” she says. (For the daughter, this realization was an aha moment. Though she’d never consciously considered it, she confirmed that Bradbury’s assessment was right on the money.) 

The best thing, they agreed, would be to have Dad identify what he really wanted. Did he want to keep the farm with the family name, possibly by dealing only with the daughter? Did he want to set things up for the grandkids’ future?

Bradbury advised that it was important for him to know that he didn’t have to quit working entirely. He had an opportunity over the next few years to define his new role himself and to contribute to the operation by doing the things he liked best. 

what’s at stake

Farm couples who first come in after the death of a friend are not uncommon among her client base, says Bradbury. They have seen firsthand the mess left to the wife when the husband dies without leaving any financial directives – not even a will.

She remembers one farm wife saying she’d been on a need-to-know basis, “but there are things I need to know now!” the wife said.  

If Bradbury gets a chance to sit down with the husband, she’ll say, “If something were to happen to you, I need you to think about what is going to go through your wife’s head. What is she going to do? She’s going to panic; she’s going to be scared. If you’re the breadwinner, how will she survive? How will she move forward? Ask yourself what you want, because she wants what you want. That was always her role: to be there, to support you, help you, whatever that might be.” 

These questions help it get real for the spouses so they’re ready to start estate planning, Bradbury says. 

Maybe it’s just eye contact

AgCountry Farm Credit Services hosts annual informational/update meetings at each of its branches, and Bradbury is the facilitator. 

“Sometimes I have the same person sitting in the front row at my presentation every year. This year, I finished speaking at one branch and before the meeting was over I’d booked four appointments. One farmer said, ‘I know you saw me, Marlene. You’re right, I’ve got to do something. This could be a disaster!’ I told him, ‘OK, let’s get something on the calendar.’

“We try to do it in phases by what’s most important. Is it retirement? Is it transition? Is it drawing up a will? We work on one thing at a time, then move on to the next in a couple of weeks. It’s just too much to do all in one sitting,” she says.  

“I tell people they don’t have issues; they have challenges we’ve got to turn into successes. Seeing what isn’t working is a success, too,” she points out.

Conversations about a client’s needs and goals often lead into other realizations, says Bradbury. “It’s sort of like they suddenly look in a mirror and say, ‘Oh. That’s me.’ ”

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