Where to start on succession planning

Another article about succession planning — you probably feel like you’ve read them all. Although always presented with the best of intentions, you may feel as though many of the pieces you come across are littered with warnings about what may or may not happen if you don’t have all of your financial affairs in order. While you should be aware of all the scenarios that could play out in the event of lack of succession planning, for the purposes of this article, let’s assume you have already decided it’s time to put your planning in motion. But where do you start?

The best starting point is to contact the person you hold in the highest regard when it comes to the finances of your farm operation. A CPA with experience in agribusiness and wealth planning may be a great starting point. Not only will they be able to address your needs from financial statements to family matters, but you should discover that a CPA’s experience and background creates a special level of caring and investment in your needs and the future needs and success of your operation.

Our firm has had the opportunity to assist many farm families through the years. I especially enjoy helping families with succession and wealth planning as I also grew up on a family farm. I look back on my experiences being raised with several siblings and farming parents and grandparents and extended farming family and realize how blessed I was to learn the exceptional life-long lessons created by living off of the land and raising livestock fed by the fruits of the land. It is these experiences that help me to uniquely understand the devotion and attachment to the farm and its way of life. As a result, succession planning for the farm is as much emotion as it is sound finance and each family situation is different. It is so important that you have trusted advisors to help you through the myriad of considerations for succession planning.

Once you have set a date to meet with your trusted advisor, it is time to gather some important information. Below is a checklist of financial data and documents you will need from the get-go.

Please keep in mind that successful succession planning can only be accomplished by a thorough consideration of your future financial and retirement needs. So, your trusted advisor needs to acquaint themselves with both areas to assist in your planning.

Some helpful items for your first meeting;

• The complete history of your farm business. Have you always used the land or was it ever farmed by someone else?
• The current estimated value of your farmland. If you aren’t sure where you stand in regards to value, your CPA can assist you in beginning the valuation process.
• All information related to mortgages, sale agreements, etc. that are tied to the farm and business.
• Personal and business tax returns. Your CPA should have these at their disposal unless you’re forging a new relationship with a new accountant. No matter how seasoned your relationship is, expect for your CPA to need to look at returns from the last several years.
• Recent financial statements for the farm business, spanning the last three to five years.
• The details about how your farmland was obtained, how your assets are registered and how you currently run your business operation. What was the original cost of your land and buildings and their legal description? Do you run your business as a sole proprietor, a partnership, an LLC, or as a corporation? Be prepared to share these specifics.
• A schedule of all equipment with purchase dates, cost and depreciation considerations.
• Your current will. Make sure it reflects all desired family members and that all vital information such as ages and addresses are up to date.
• Current copies of your Health and Financial Powers of Attorney.
• Current Social Security Statements of Benefits.
• A listing of life insurance owned on each spouse.
• Copies of any trust documents.

Reviewing this information will allow your CPA to get a better idea of the bigger picture — where the farm business has been, how it’s positioned to grow, who will be involved moving forward. The big picture is important when it comes to succession planning.

Once you begin this process, you immediately come to learn that succession planning isn’t just about deciding who to pass the operation on to. It’s about securing the future for everyone involved. It’s not about losing control, it’s about keeping it and acquiring the peace of mind that comes with knowing that things will be secure for seasons of life such as retirement and well beyond.

Bradley H. Ridge, CPA, CMGA is Managing Partner at Holbrook & Manter, CPAs. Bradley has been with the firm since 1982. Farming is in Bradley’s blood, as he was brought up within a family farming operation. His background has positioned him to help agribusinesses grow and thrive. Bradley is also well-versed in the areas of assurance, tax, management advisory services and individual financial planning. Contact Bradley at 740-251-9078 or holbrookmanter.com. Holbrook & Manter is a professional services firm founded in 1919 in central Ohio.