Train the next generation of producers

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Recently, a client had some serious health problems that weighed on his mind. Only 57, he had been dealing with diabetes, and also needed four bypasses a few years ago. Although he currently appeared to be in good health, he was troubled about training his son to take over in his potential absence.

The son had enlisted in the Army to utilize the free college education option provided by the armed services. After serving his enlistment, he spent one year at a local university studying agriculture, but recently was recalled to serve in Iraq.

The father was concerned what would happen if his health deteriorated and he was unable to supervise his son until his son was capable of managing the farm. He was also concerned that his wife, who was not involved in the day-to-day operations of the farm, might merely line up the assets and sell them. She had not encouraged their son to return to the farm.

Develop a plan

We worked with the father’s advisers to develop a plan to address those concerns.

  • First, the father’s attorney developed a plan to protect the farm assets until his son was capable of managing the assets. He did this by creating a trust that would be invoked at the father’s death. The trust would hold the assets until the son had been properly trained, or decided he was not interested in returning to the farm. If he returned, the son would be required to serve an apprenticeship as if his father were still present. The father then selected a family friend to serve as trustee. The trustee’s function was to evaluate the son’s training and to turn the operation over to him at an appropriate time. 
  • Second, even though the trustee was a good businessman, he had limited agricultural experience. A local farm-management firm was selected to assist with financial records, negotiate with landlords and help with major long-term operational decisions. After an appropriate apprenticeship and approval of the trustee, the son would assume these activities.
  • Third, while the farm manager could supervise the business operation, he could not provide the technical supervision that the son needed to become a good manager. There was a key employee who could be capable of assisting with a majority of the day-to-day activities, but he was not a manager. Therefore, a farm operator from a neighboring county who had attended college with the father was retained to consult with the son on these matters.

Only the beginning

Merely naming the three key players in the training plan was just a start. 

To be effective, each adviser needed to understand the farming operation. The father decided to meet annually with the farm manager and the farm operator to inform them of his plans for the coming year. Financial statements would also be provided to the farm manager and the farm operator on a regular basis. The trustee and the father met separately with the family attorney and me so that the father could discuss his goals for his son.

We hope the father’s training plan will not be required. However, if health problems prevent the father from completing the training of his son, the management team is ready to fulfill the father’s vision

What about your operation? Would your dairy survive if you didn’t have adequate time to train your successors? Plan today to create your own team to train your children or non-family successors in the event you aren’t present to complete their training.

Darrell L. Dunteman is an agricultural financial consultant and accountant in Bushnell, Ill. Dunteman also edits the Farm and Ranch Tax Letter, a monthly agricultural tax newsletter. Send your management questions to Dunteman at: farmandranchtaxletter@earthlink.net.

 

 



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