Don’t wait until you have all the answers before you start working on a succession plan.
As farm advisors, we often get questions like “How much does insurance cost for someone like me? What would the tax consequences be if I transferred land to my children? If I sell my land and invest the proceeds, what kind of rate of return can I expect?” Although these are great questions to ask, we have found these types of questions are sometimes the reason farmers have trouble getting started on a succession plan.
Focus on what’s important
My advice: Keep it simple and let your professional team take care of the tax consequences, the insurance costs, and how the proceeds of your sale will be invested – that’s what you pay us for. As a farmer looking to put together a succession plan, you should be asking yourself “Who would I like to see take over the farm? How would I like my non-farming children to be treated? What kind of retirement lifestyle am I looking for?”
Let me ask you this, “If you lived in a world without taxes, how would you like your farm succession plan to look?” It’s amazing how your mindset can change once you eliminate the boogeymen (aka taxes). Although we all know this tax-free fantasy world does not exist, removing taxes from your thoughts when thinking about succession planning helps narrow your focus to what is important to you.
Once we have an idea of what you would like your succession plan to look like, it is our job to put together a plan that gets you as close as possible to achieving your goals. It is at this point where the tweaking begins and the question of insurance costs, tax consequences, and investment returns should be considered.
As advisors, we can be guilty of over complicating things. We run workshops, write articles, and discuss an infinite amount of options for you to consider. At the end of the day; however, this is just noise. Forget what you have heard in the past and start with the basics – tell us what you want and let us work hard to put together a plan with solutions that help you to achieve your goals. Don’t overthink your situation and fall into the “paralysis by analysis” trap. Falling into this trap can leave you with a lot of good ideas today, but with no concrete plans for tomorrow, and a lack of clarity for your family and your farm in the future.