The ninth of twelve most common mistakes agribusiness owners repeat:

Forget the estate tax just for a moment - not that it doesn’t exist.  It does and, depending on whose version of White House politics you believe, it will continue to pose a challenge for America’s agricultural community.  But the imposition of estate taxes will not, in and of itself, destroy the family farm.  In most cases, a competent estate planning attorney, financial advisor and CPA can help an agribusiness owner avoid, or at least minimize, the estate tax obligation.

Nevertheless, inadequate estate planning is still a major reason most farms do not pass to the next generation.  That may sound ridiculous, given that most farmers have some form of estate plan, and there is no record of a single family losing their farm due to the estate tax.  Yet, the burden of estate taxes and transfer obligations is not insignificant.  The costs can be considerable and the need for cash can be crippling.  Transferring the assets of an estate - real estate, business, personal or capital - can cost a substantial amount of money.

Keep in mind: Estate tax planning and Succession planning are not the same thing!

__________ (Continued from Leave a Legacy on AgWeb) __________

Many people use the terms interchangeably but, as Mark Twain wrote, “The difference between the almost right word and the right word is really a large matter - - it’s the difference between a lightning bug and the lightning.” 

Common off-the-shelf estate planning techniques are fine if the goal is to mitigate the estate tax.  The goal for succession planning is to pass a going concern to the next generation as a viable business opportunity.  So the focal point is the goal, rather than the technique.

Goal                                                             Tools / Techniques
Minimize the Estate Tax                          Common trusts/wills designed to parcel
                                                                     exclusions and exemptions to minimize
                                                                     the estate tax

Transition the operation                         Succession planning strategies are built of
to the next generation as a                    five distinct and overlapping elements -
viable business operation                     Ownership Transition, Efficient Estate
                                                                    Distribution, Retirement Option Design, 
                                                                    Wealth Creation and Leadership 
                                                                    Development.

All too often we see people using the wrong tool for the job.  If the only thing in your tool box is a hammer, every problem looks like a nail.  But, if you have a large cabinet with a selection of specialized tools, you’re inclined to appropriately diagnose the problem and then apply the proper technique for the job.