The financial agreement between Congress and the White House at the outset of the year solved many federal financial issues, and helped provide some degree of certainty for the federal estate tax.
While the result was not elimination of the tax that agriculture had lobbied for, it imposes a 40 percent tax on assets over $5 million, versus the 55 percent tax on assets over $1 million, which was set to go into effect at the beginning of the year. Uncertainty complicates farm succession planning, but the permanent rate now in place, which is indexed to inflation, will helpfamilies plan. So, where do we begin?
Twelve step programs have become famous for success. And a trio of ag economists from Kansas State and Oklahoma State Universities has developed a 12-step program for farm succession planning. Their initial advice is that “this is not an easy process.” There is a lot of planning, preparation, and communication that goes into a successful farm succession plan.
Identify core values of what you and your family believe. What do you desire to achieve? What are you willing to sacrifice in order to reach your goals? In the end, what do you see happening? How are family members treated and served by the succession plan and what should happen to the assets of the operation and the enterprise?
Everyone should identify what they want to happen when a transition of the operation takes place and what that person wants, needs, hopes, and fears that will happen during the transition process.
Everyone should establish a vision and mission for the enterprise as well as objectives and goals. There will likely be conflict among the family members and those need to be addressed and resolved as you move forward with the planning process.
Human resources are the strength of the operation, but also can be weaknesses. The ag economists say it is important to identify the strengths and weaknesses of all involved in the farm transition and put them in positions that will allow them to thrive. Many transitions can fail without good communication among those involved, and adjustments have to be made.
Those in charge may have a challenge if the senior generation wants to drive the bus. The successor needs to make decisions, even if there are growing pains in doing so. Each stakeholder needs to know where they stand in the organization and see who is above and below them and where lines of authority are.