Legacy by Design LLC.

Cultivating Multigenerational Success in the Agricultural Community

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About Us

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For family business owners, our Comprehensive Succession SolutionTM includes planning for:   

Ownership Transitions

Retirement Options

Financial Security

Investment Strategies

Estate Tax Provisions

Buy/Sell Designs

Key Person Strategies

Equitable Distributions

 

Legacy by Design provides hometown service from
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A Broad Look at Succession

Aerial view of green farmland.By Kevin Spafford, CFP®
Founder - Legacy by Design, LLC

Although, as an owner, you would like your children or other family members to eventually own and manage the operation, succession planning is much broader than transferring ownership from one generation to the next. Succession planning prepares you, your farm, and your family for the day when the owner no longer participates in day-to-day operations. Without planning, that day can create crisis and conflict in both the business and the family.

Planning for an Inevitable Change

Ideally, a succession plan is a comprehensive strategy which should address:

  • Converting business wealth to assets that can be used to fund your retirement.
  • Transferring ownership in the business to your prepared successors.
  • Treating your children equitably while considering how to divide ownership among those active in the business and those who are not.
  • Addressing estate planning concerns associated with the transfer of the business, including minimizing estate and gift taxes, providing liquidity to the estate, and planning for a surviving spouse.
  • Strategic planning for the business’ success after the transition, with primary focus on choosing and grooming a management successor to successfully step in.

Transitioning ownership in a business is unlike transferring any other asset. Often, a significant portion of a farm’s value is attributable to the owner’s personality, efforts, and relationships. So, without planning, the value of the business may decline drastically when the owner is no longer involved.

Why a Team Approach Is Needed

Because succession planning addresses a broad range of issues, a cross-disciplinary team of professionals is usually necessary. Clearly, no single professional will be able to provide all the services needed to develop most succession plans. A team approach brings depth of experience and knowledge to the table. However, the professional who takes the lead in building the team and accepts responsibility for overseeing the project through implementation may be the most vital to the success of the process.

Recognizing Factors That Affect the Strategy

It’s important to realize that every owner has a unique personality and situation that may limit the available options for transferring ownership and management responsibility. Some of the more common may include:

1.     Ability to Relinquish Control. Giving up control in the business is difficult for many owners. You may be concerned that your successors will cause the business to fail. In these cases, you may decide to transfer control gradually, while gaining confidence.

2.     Age. An owner’s age impacts management succession alternatives. In general, the older the owner, the fewer the options. If you have many years left to work, you may choose to transition responsibility gradually, providing the opportunity to see potential management successors in action. You can maintain control until the successor is ready to take over. An owner who decides that the successor will not be capable of assuming responsibility still has time to groom another candidate.

3.     Condition of the Business. An operation with a history of profits, a sound customer base, good relationships with landlords, capable employees, and a plan for the future clearly is more likely to sell than a business with apparent weaknesses. Also, good records and an established set of policies and procedures enhance the business value. You should assess the business to realistically understand its worth and to identify actions that could be taken to enhance the value.

4.     Planning Tolerance. Recognizing that an owner may have a limited tolerance for planning, including costs, risks, and complexities will help everyone involved – the owner, family, employees, and advisors negotiate the planning process. If the succession plan exceeds the your tolerance for any of these items, it is not likely to be successfully implemented. Thus, it may be appropriate to adopt an incremental approach to succession planning to avoid overwhelming the owner with the cost, complexity, and commitment of a comprehensive plan.

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