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Sunday, August 9, 2020  
 
 
- DTN Headline News
Pandemic-Proof Your Farm Legacy
By Elizabeth Williams
Friday, August 7, 2020 10:35AM CDT

INDIANOLA, Iowa (DTN) -- Alan Hojer, a succession planning consultant, was busy before the pandemic, but calls from farmers and ranchers looking to begin or update their plan have accelerated since COVID-19 began circling the globe.

"The main obstacle is not that they don't want to have a transition plan for their farm, it's that they don't know where to begin," said Hojer, whose "Keep Farmers Farming" program is sponsored by First Dakota National Bank in Yankton, South Dakota.

Jim Rein, CPA and partner with KCoe Isom LLP, said now is the perfect time to put together an estate plan or update your current plan. "We have the lowest interest rates and tax rates we'll likely see in our lifetime, and the most advantageous tax laws we've ever had," he said.

The uncertainty of the pandemic has opened up sensitive conversations about what happens if someone gets really sick or dies that, in the past, people were reluctant to talk about.

"A lot of advice we're currently giving is the same as before," Rein said, "but people's mindset is different."

HOW TO START TRANSITION PLANNING

Hojer encourages farmers to reflect on how the farm transitioned to them. "What did they like or not like? And then, adjust that to their business today, which likely involves more people and a bigger, more complicated operation," he said.

Before going to an estate planning attorney, he suggests doing a little homework to make the best use of their time with a planning professional. Consider what your operation looks like today.

"I spend a lot of time helping people figure out where they are now," Hojer said. "If you can see your next 12-18 months and it will be OK, then you can think about transition. There are opportunities out there. Planning gives you hope."

Your estate planning expert will ask a lot of questions: Do you have a successor? How do you want to treat off-farm heirs? How do you want to shift management control and asset ownership -- quickly, slowly, after certain goals have been achieved? The estate expert will want to know your business structure, your management team and possible future managers. The more time you spend making these decisions about what you want for your farm's future, the less time you need to spend "on the clock" with the attorney.

There is a difference between estate planning, which decides what will happen to your assets when you die, and succession planning, which is how to transition the farm or ranch operation to the next generation, explained Rein, who leads KCoe Isom's NextGen division.

"Sometimes you have no heir apparent," said Nate Franzen, president of the ag banking division at First Dakota National Bank. "You still want to be proactive in the planning process. Maybe you want to position assets to have your land farmed by a longtime family friend, or you want a sale with the least tax consequence. Having the right plan is key."

When the attorney understands your operation and knows your goals, they can offer strategies, such as entity structures, trusts, gifting plans, buy/sell agreements, etc., to best reach your goals.

SET DEADLINES AND STICK TO THEM

Once the farm work gets busy again, it's easier to procrastinate on big-picture planning, Franzen said. "Succession planning gets moved down the priority list."

The next step is to communicate with your spouse and children about what your ideas are, what your options may be and what their ideas and goals are. But without a deadline, it often doesn't happen.

"And sometimes you need a facilitator to get the discussion going," Rein said. "Then you can start to broaden the scope in terms of that discussion."

A deadline gets the ball rolling. For example, Rein may assign a farmer the task of having the conversation and sharing his notes by the end of October. Then, they'll set another deadline for the end of the year.

"It's a process. Some people look at estate planning as an event. But, in fact, it's more of a process,"

Rein said. "Even for folks who have already completed their estate plan, it's time to blow the dust off those documents and see if they are still in line with what you are doing as a family and as a business."

Rein said those who are successful in passing the farm to the next generation make planning their transition a priority.

"It's just as important as crop rotation and chemical inputs. There are plenty of horror stories of family breakups out there," Rein said, recalling a recent visit with a farmer. While driving down the road, the farmer pointed to a run-down farm, and explained that it used to be a local showplace. All of the area's farmers wanted to be like those guys.

But "no one in the next generation was ready to take on the operation or wanted to," Rein said. Now, there are weeds in the fence row and equipment sitting outside. It was a sad sight, Rein said, and one that might have been avoided if the family had planned ahead.


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