The problem, Voss says, is sentimental attachment.
“It was their home. They saw mom and dad work it, and most of the time they didn’t see their sibling work it. He was going to high school and then college,” Voss says. “When he came back, they never really saw him working. They were all gone.”
Think it through
As you work toward a plan for asset distribution, think through the potential ramifications of your actions.
“If we have $10 million of assets and $5 million in debt, we have $5 million in equity leftover,” Voss says. “The son taking over the farm has all that debt to deal with… If he’s one of four children, the next thing you know, he’s got to deal with threefourths of the equity. So the non-farm equity becomes his farm debt.”
Your plan for distributing the business assets also can put heirs into business with each other when they had no intention of doing so. This can backfire on more than one level.
“My experience as an attorney tells me that death brings out the best and worst in families, and usually it’s within about half a second of one another,” Baker says.
Plus, your unintentional business partner’s knowledge of modern dairy farming practices can be severely limited.
“I tell people that I grew up on an acreage,” Baker says. “My father got rid of the cattle back in the early 1950s. I don’t know anything about that business anymore. It would not be a good business decision to put someone in business with me, and yet that’s what we see happen.”
Do it now
Taking the time to put together a comprehensive asset distribution plan will not only move the business forward, but equitably compensate both on-farm and off-farm parties.
“There are lots of tools that can be used very effectively by farm business owners to put together a comprehensive business succession plan that helps to keep the business assets together and also provides a form of compensation for the in-business heirs and the non-business heirs, without destroying the business,” Baker says.
“If you don’t sit down and do some business succession planning, there’s a good chance that your family will no longer have a farm business. And, there’s a good chance that the farm business will no longer have a family.”
A list of resources to help you make wise distribution decisions can be found at dairyherd.com To access it, type “Tools for business succession planning” into the “Search” box.