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Wealth Management - October 2017

by Stacy Wise | Oct 23, 2017

corn field
Preparing Your Succession Plan

By Rick Imhoff, CFP ®

Developing a personal estate plan can be a difficult task, but when you own a farm, the difficulty level can be even higher.  Not only do you have to consider how to pass on or dispose of your farm from an estate planning perspective, you also need to consider how you will fund your retirement years, especially if most of your net worth is tied up in the farm.

As with any aspect of estate planning, you need to start well in advance of an event to consider all your alternatives and to have the time to put a plan in place, since full implementation may take a few years.  Here are four steps to consider when preparing your succession plan.

Clearly Define Objectives – Take time to identify and assess your financial and life goals, think about what you would like to do in retirement, and how much money you may need.

Where Are You Now – Develop a net worth statement and a cash flow statement to find out what you own and where your money is going.  These two documents will tell you a lot about your lifestyle and how much more you may need to fund future goals.

Evaluate Current Situation and Examine Alternatives – Review how your assets are titled and how your farming business is structured.  Consider other methods of ownership that may better facilitate transfer of your assets and farm, or their future sale or liquidation, based upon your objectives.  If you plan to pass on your farm to one or more family members, what will the other family members receive especially if it is your desire to equalize distribution of your estate among your heirs?

You may want to meet with other farm owners who have developed and implemented a succession plan and find out what worked, what didn’t work, and what they would do differently.  Other farm owners can also be a good source of referrals for professionals to help you with your succession plan.

Another good source of information may be the wealth advisors in the trust division of your local bank.  More than likely, they have worked with many farmers over the years and handled the administration of trusts and the settlement of estates that involved a farming operation.  Their insight into the entire succession process can further help you to consider various options and begin to bring into focus the type of succession plan that will work for you and your family.

Assemble Your Succession Team – You will need to work with several different professionals to successfully develop and implement a succession plan.  Your team will typically include an attorney, accountant, wealth advisor, and financial planner, but may include others who have expertise in business valuations, investment management, insurance, and employee benefits.  One of the professionals should be your “quarterback” to make certain all the bases are covered and each member of the team is doing his or her job.

The first three steps are important to accomplish prior to meeting with members of your succession team.  By first accomplishing those steps, you will save time and money when you finally do meet with your team of professionals.  Your time with them will also be more productive because you will be better prepared and organized.  The key is to begin the process now before circumstances may reduce or eliminate your options.

Rick Imhoff, CFP®, is Senior Vice President & Senior Trust Officer for MidAmerica National Bank. He can be reached at 309-647-5000, ext. 1130 or by email.

Investments are not FDIC-insured, hold no bank guarantee, may lose value, are not a deposit, and are not insured by any federal government agency.

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