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Text Box: Succession Planning Text Box: A full succession plan can take many years to complete and for many, the most difficult part is getting started. Even neighbors with similar circumstances may need different plans, because of the differences in their goals and objectives. There are, however, 4 basic steps to creating every succession plan. Throughout the succession planning process it’s important to keep the “big picture” in mind and avoid getting tied up in details too early. Step 1: Collect personal and financial data. Parent need the facts at their fingertips. Before starting discussions with family members and outside advisors you should list: All significant farm assets and estimate the current fair market value. How the assets are owned. That is, by a company, the parents jointly or by one person. Record the land’s legal description. Record the original cost of the land and any buildings. Note the value at valuation day, if acquired before 1971. Summarize details of farm debts and non-farming assets. Then, gather your wills, leases, the latest farm appraisal and recent tax returns. Step 2: Review the critical issues: Perhaps this is the most important step– a time when parents look at the broad financial and personal issues that will determine how the farm is transferred to the children. Questions to consider include: Are we looking for an interim arrangement, such as bringing the child into the farm as a partner or share holder or a complete lease? Is it important for us to maintain control over the farm? Will we need or want to move off the farm? In general terms, what are our financial needs now and in the future? Will the farm support all family members who are interested in it? How do we decide on an arrangement that’s equitable to all our children? This stage of the process and the next involve income tax consequences, but parents should not concern themselves too much about these. Plan on an after tax basis. For example, estimate retirement income needs after-tax not pre-tax. Text Box: Step 3: Establish broad goals: There’s no need to “flesh out” matters in detail at this point. Review the critical data and reach tentative answers to some of the questions raised: Will there be a full or partial sale, or some sort of interim arrangement such as a partnership? As parents, will we maintain control of the farm business? How much retirement income and capital will we need in the short and medium term? This is a good point for parents to separate “wants” , which they are willing to sacrifice or defer to reach an acceptable plan, from “ needs”, which they cannot do without. Step 4: Learn about transfer tools. Just as farmers must know about farm equipment, families transferring a farm between generations need to understand succession ‘tools’. These include: Tax tools such as the capital gains exemption and “farm rollovers”. Security tools such as mortgages and agreements for sale. Business structural tools such as proprietorships, partnerships, joint ventures and corporations. Property title tools such as joint tenancy, tenancy in common and life interests. There is no need to become expert in any of these areas, but you will be discussing them and it’s important to have some grasp on what advisors are talking about as they review your options. Publications explaining all these tools can be obtained from your accountant and from many provincial Agriculture Departments. After working through all 4 steps, you’ll have a clearer idea of you direction and you will be positioned to make the necessary decisions to get the transfer process underway. For more succession planning, visit: farm succession.com Text Box: Page # Text Box: Country Roads Text Box: Volume 2, Issue 4

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President’s Message

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Estate Planning

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Ag Fieldman’s Message

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Project Tour 2003

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Succession Plan

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Project summary’sPage 4. (Untitled Page)

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