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THe ROAD TO TRANSITION PlANNINg SUCCeSS

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CHAPTeR 1

The Road to Transition Planning Success

What is the difference between transition planning and estate planning? There is often some confusion between transition planning and estate pla nning. They are distinct planning topics but complement each other. both are important to the overall plan to transition ownership and management to the next generation. estate planning deals specifically with wills and legal documents, tax management strategies, investment and savings, insurance, estate distribution and contingencies A transition plan, where the next generation is going to be farming, must include a complementar y estate plan, but not necessarily vice versa.

If the next generation is not interested in farming, then the retiring farming family may only need an

estate plan.

What does a transition plan look like?

A transition plan is a living document that helps guide decisions around ownership, leadership, business structure, tax strategies and contingency plans. There are several steps to developing a plan. These steps can take from several months to several years to complete depending on the needs and size of the business. Your transition plan will be revised frequently to align with the changin g environment and family

circumstances. The result will be a clear, detailed plan that will help ensure a successful transition.

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TRANSITION PlANNINg gUIDe FOR AgRIbUSINeSS

What is the transition planning process?

The first step in the transition planning process starts with an initial planning meeting between family

members and others involved in the transition planning process. The next section contains information on how to get this meeting started. The actual transition planning process includes three phases and they ar e completed through specific topics:

Phase 1: Readiness Assessment

This phase includes topics that will help you to determine if you are ready to begin transition planning. Transition planning requires a significant investment of time, money and emotional resources. There are far

ms that are simply not ready for transition planning. It is far better to realize this early. It is easier for ownership and management to make adjustments before beginning to work through the process.

Phase 2: Plan Development

This phase includes topics that will together form your transition plan.

Phase 3: Plan Implementation

Developing a transition plan can follow a standard process but implement ation is specific to each farm family.

THe ROAD TO TRANSITION PlANNINg SUCCeSS

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What are the approaches in transition planning?

Next, after your initial planning meeting, select a planning approach th at is right for your business and family needs. There are five planning approach options to choose from, each identifi es specific topics that help build your transition plan:

Option 1 - Comprehensive Approach

This approach is the most detailed and all-inclusive approach. Most farm families will take a year or more to work through all the topics.

Option 2 - Condensed Approach

This approach includes the minimum recommended topics. Families followin g this approach could work through the topics in six months or less.

Option 3 - Estate Planning Approach

Use this approach when there may not be a next generation wanting to ret urn to the farm or business. For families in this situation, the most impor tant topics to consider are related to the estate plan. Families following this approach could work through the topics in six months or less. Option 4 - Ownership Transfer and Tax Strategy Approach This approach already involves having a good understanding of how you se

e your family managing through the transition. You will need to understand the different ownership transfer options that are available and their related advantages and dis

advantages. Y ou will also need to apply the most appropriate and advantageous tax strate gy possible. Families following this approach could work through the topics in six mo nths or less.

Option 5 - User-Defined Approach

You may find that none of the approaches, as outlined above, meet your needs. The user-defined approach lets you to tailor the transition planning topics to meet your specific needs. each planning approach is available as a table to help guide and record y our progress. locate and tear out your chosen planning approach in the Appendix (pages 195-205) to guide you through the process. Follow the next section of this guide to start the process of your transition plan.quotesdbs_dbs32.pdfusesText_38

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