A Family Legacy: Succession Planning for Ranch and Farm

OwnersA Video Tutorial and Facilitated Workshop

Bart EleveldExtension Economist

Oregon State University

RMA Commodity Partnership Agreement ’07-’08

• Oregon Cattleman’s Association was commodity partner

• Livestock emphasis, but farmers also attended• Phase I, Workshop series:

– 2, 4 ½ hour workshops in January and April– 5 locations: Eugene, Prineville, Burns, Baker City &

Klamath Falls

• Phase II, DVD tutorial/facilitated workshop

Workshop 1

• Focused on the need for succession planning• Challenges of family communication• Introduction to the case study family and valuing

their legacy– Balance sheet

• Some simple management strategies• Building a “team” of experts

Workshop 2• Reviewing the case study family

– Prospects for future multigenerational success: income statement and cash flow

• Expert advisors talk about succession planning tools– Charitable remainder trusts– Accounting and Appraisal tools for valuation discounts– Legal tools: Wills, trusts and buy-sell agreements– Charitable contribution tools: remainder trusts– Conservation easements and trusts

DVD Tutorial/facilitated Workshop

• Dual purpose– Facilitated workshop series utilizing local succession

planning experts.• DVD takes care of formal presentations• Local advisors answer questions and lead discussion• Let participants know there are local resources to turn to.

– Self study tutorial• Producers can do self-paced learning• Web site lists additional background material including more

detailed statewide workshop presentations, programs available in other states.

Facilitated Workshop• Ideally would allow local facilitator to direct

a two (or more) session workshop series– First session stresses the need, importance

and challenges of succession planning• Uses dramatized scenario of case study family to

personalize the situation• Has audience participation/involvement exercises

that can stimulate discussion and can be done as “homework” assignments for second session

Goals/Objectives and ChallengesA Family Legacy: Succession Planning for Ranch and Farm Owners

Activity #1: Succession Goals/Objectives

Name(s):______________________________________________________________

Business Name:________________________________________________________

Relationship(s):________________________________________________________ (e.g. your relationship to owner(s) and business) Long term goals: Under ideal circumstances, what do you hope for the future of this business and/or its assets in:

10 years? 20 years? 30 years? After you’re gone? What major challenges or obstacles stand in the way of meeting goals? What short term goals (1-5 years) do you have for realizing a succession plan? From whom (which type of experts) do you think you need help the most?

Heirloom/Lifestyle ScalesA Family Legacy: Succession Planning for Ranch and Farm Owners

Activity #2: Rating Your Assets on the “Heirloom” Scale

Name(s):______________________________________________________________

Business Name:________________________________________________________

1 = My property is one of the financial assets in my portfolio and nothing more.

10 = My property is a priceless heirloom to be protected for

future generations at all costs.

Additional thoughts about “legacy”:

Please write your thoughts about the long-term purpose of your assets. (Turn the page sideways if it is easier to write that way)

1 2 3 4 5 6 7 8 9 10

Balance SheetA Family Legacy: Succession Planning for Ranch and Farm Owners

Activity #3: Valuing the Legacy (Balance Sheet)

Please try to categorize the things that you own (assets) and how much you owe (liabilities). If you haven’t prepared a balance sheet before, or had someone do it for you, this may be an approximation. The purpose is for you to begin to appreciate the magnitude of your estate, and what it’s composed of. If you prefer, you can do separate sheets for major components of your family business, or you can separate business and personal. See our website for an Excel spreadsheet that will allow you to do a more complete balance sheet.

Things you own: Assets Value Amounts you owe: Liabilities Value Current (≤ 1 year life, e.g., cash, bank accounts, product inventory, supplies, accounts

and short-term notes receivable, etc.)

Current (due in ≤ 1 year, e.g., notes and accounts payable, operating loans, credit card balances, accrued interest and taxes, optional: current year’s principal on non-current debt)

Total Current Assets Total Current Liabilities Non-Current (≥ 1 year life, e.g., durable capital like machinery, equipment, breeding livestock, capitalized perennials, buildings, land, improvements)

Non-Current (due in ≥ 1 year, e.g., term loans on durable capital, mortgages, notes and contracts on real estate, etc.)

Total Non-Current Assets Total Non-Current Liabilities Total Assets Total Liabilities Net Worth (Total Assets – Total Liabilities)

Succession “Team” Structure

A Family Legacy: Succession Planning for Ranch and Farm Owners

Activity #4: Succession “Team” Structure or Organization Chart

Skybox: Who Are the Owners?

Attorneys Accountants

/Tax Planners

Investment Advisors

Appraisers Business

Consultants / Advisors

Others (Facilitators, Mediators, Counselors)

Sideline:

Who are

the

Experts

or

Coaches?

The Field: Who are the Players—persons involved in the management and operation of the business or who might be potential owners in the next generation (write sideways)

G 10 20 30 40 50 40 30 20 10 G Support Staff and Fans: People important to the business, may or may not be future owners, but need to be informed and consulted to varying degrees (spouses ???, younger relatives, key employees, etc.)

– Second session turns to “tools of the trade” that producers might use in their succession plan

• Uses presentation by “experts” to give an overview of some of the methods and instruments. Relate to the case study where possible to have a unifying thread.

– Attorney

– CPA

– Investment and Insurance Advisor(s)

– Business management consultant(s)

– Communication mediator/facilitator

– Conservation easement representatives

– “Head coach”

• Need to stress the “teamwork” aspect