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Ideas on long term handover of operation

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Jake

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Trying to find some ideas on how to work a family hand over of an operation. Grandparents are owners of the cattle and equipment today, they own about half the ground and rent the other half from my father.

We are trying to come up with a way of passing ownership of the cowherd to me over the course of say 10 years using labor and management skills to pay for the buy in. So in essence since I have never taken a wage and am fine with continuing this in order to use what was a wage to pay for the buy in.

Not sure if this makes any sense or if i spelled it out well. I know you all will have more questions and am happy to answer them to get to some quality perspectives.

Thanks in advance
 
How do you plan to pay for your living expenses? It has to come from somewhere.

As far as transfer, you could negotiate a percentage of the calf crop (as payment for management and labor) that you keep. From these calves you choose replacement animals. Every year you could recalculate what percentage of the expenses you are responsible for. This would be based on what percentage of the herd you own. As time goes on you will own are larger percentage of the herd as cows are culled and replaced with heifers you own.

Just a thought.
 
I would recommend talking with a good estate planner/tax attorney there are ways to do it to prevent taxes killing you when something happens to your Grandparents or your parents. Pre-planning is the smart thing to do for sure. We started working with a tax attorney 10 years ago and slowly but surely our assets are being moved into an irrevocable trust that upon our death goes to our children. Each year we move a % into the trust, that is stating it simply but gives you something to think about.

gizmom
 
The older generation can form one or more Limited Liability Corporations, and transfer a certain number of shares each year. Draws can be taken, cash disbursements can be made from real estate, and private land can be leased back to your own LLC. Get a good estate planner.
 
I have full time off farm employment so living expenses.

I appreciate all the insight. I like the LLC route personally but I believe the % of the calf crop is more along the lines of what the grandparents are thinking. I do plan on sitting them down in front of a tax attorney to make sure that I don't have to give half of it back later on.
 
Do you have brothers and/or sisters? If so, how will they be treated? Guess you could do like my parents did before they passed, leave it all to the only son and the two daughters can go to "L". Sorry to rain on your topic Jake but this has been a nightmare for me. I've lived everything bad when it comes to succession of the farm.
 
DejaVu said:
Do you have brothers and/or sisters? If so, how will they be treated? Guess you could do like my parents did before they passed, leave it all to the only son and the two daughters can go to "L". Sorry to rain on your topic Jake but this has been a nightmare for me. I've lived everything bad when it comes to succession of the farm.
Click to expand...

Not only do I have siblings but my father before me has siblings. The land is going to be split there is no avoiding that. We don't all get along as a family so some of it will be lost out of the operation. Our place is a complete nightmare when it comes to succession because nobody knows for sure what the grandparents have set up. It's a mess, I'm just trying to get something set up to protect my own investment at this point and try to have something started for the future.
 
http://www.fizerbeck.com/family-limited-partnerships-in-estate-planning
http://www.assetlawyer.com/what-we-do/asset-protection/domestic-asset-protection/efficacy-of-family-limited-partnership/
 
You are probably pretty late getting started into it, and setting up a ranch 'transition' is probably one of the hardest jobs there is. You need great, honest, wise, knowledgeable faith filled advisors. And family members need to have the same qualities! Best of luck and keep your family together as much as possible.

Sorting out where you stand now, seems necessary to end up with anything the grandparents can 'live' with emotionally, speaking from the 'grandparent' generation in my family, and something all of you can accept may not be easy. It's sort of like people just figured out 'they' aren't making any more land......so prices are sky high. Cattle have had a good few years, from our years experience in the cattle business, high cattle prices always go down at some point, usually when few of us are 'ready' for it. Where both are necessary for this business, that is pretty tough, but there also are more variations on 'this business' than ever, too. So those determined to be in it will be, whatever it takes.

"Fair" and "equal" aren't always what they seem......and rarely from the viewpoint of all the 'players' in the family. Here's hoping you can keep your family AND build your ranch!

mrj
 
jodywy said:
http://www.fizerbeck.com/family-limited-partnerships-in-estate-planning
http://www.assetlawyer.com/what-we-do/asset-protection/domestic-asset-protection/efficacy-of-family-limited-partnership/
Click to expand...

Thanks Jody, those are very informative.
 
Ranch Management Consultants can help. You might give them a call.
'
Ranch Management Consultants, Inc.
953 Linden Ave, Fairfield, CA 94533

Phone: 707-429-2292
Fax: 707-429-2100
Email: [email protected]


I know your not from Iowa, but you might contact this guy, if he can't help he probably knows where to send you:

David W. Baker
Farm Transition Specialist
Beginning Farmer Network Advisor
ISU Extension - Beginning Farmer Center
10861 Douglas Avenue, Ste. B
Urbandale, IA 50322
877-232-1999
515-252-7801
F: 515-252-7828
email: [email protected]


Hope this helps;

Bart.
 
This is a concern of most operations. My top 10 things to remember from one that has been consulting with ranches for >20 years--This might be a little strongly worded, but it is what it is...
1st-It is the grandparents operation to do what THEY want to...heirs are not entitled to anything.
2nd-Fair is not equitable nor is equitable, fair.
3rd-It must be the "gate keepers" ideas and they have to be committed to the plan. If not, is a waste of time/$.
4th-Communication to ALL is a key. Not only owners, but all heirs-on farm and off farm. A detailed annual report to all stake holders is always a good idea! Poor/no communication with stake holders seldom promotes a sustainable operation.
5th-Treat as a business--if not a good investment for you, look to do something else! Get over the lifestyle to the poor house romance.
6th-Protect yourself-I have numerous horror stories of significant investments into an operation, that poor communication and/or planning, resulted in the insolvency.
7th-Really educate yourself before entering into any agreements that limit operations-items as conservation easements, irrevocable trusts, etc, seems to only make attorneys rich. Most I have dealt with, hamstring an operation.
8th-Must be able to walk before you run-Wisely, slowly comes to mind!
9th-Develop the exit plan first.
10th-Get a board of directors---banker, accountant, attorney, and a few successful operators that are not in direct competition with you.

Good luck! The above are my opinions only and does not reflect on my employer in anyway!
 
From someone who has lived and nearly died because of this crap.....you'll never read anything better than what has been written by cowbanker.
 

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