On August 1, 2013

Colorado ranchers know that estate planning is important for handling their family business. However, they may not be aware there is another type of planning that needs to take place. When a Montana patriarch decided to retire as the head of the family ranch, his four children didn’t know what to do. They had seen to careful estate planning, but succession planning was what was actually needed for the 52 percent of the ranch that would have been their inheritance. It was now their responsibility and none of the siblings was quite sure of what to do next, since their estate planning didn’t cover this kind of transition.

Since ranching is all about relationships, experts say, so must a family ranch’s succession plan be. Succession planning asks the following questions: How will the first generation have the money needed to run the business? What will the management structure look like? Who will be considered the leader of the business? How can the retired owner’s relationships be translated into relationships for the new owners? “Succession planning is very different [from estate planning],” according to one expert, “as it is who is going to run this business.”

Although culturally, leadership responsibilities have traditionally gone to the first-born son of the family, that is not necessarily the best thing for a ranch. Who among the siblings can best drive value for the rest of the may be a more relevant concern these days.

An attorney experienced in estate planning concerns, including succession planning, may be able to help smooth a family business’s transition from one generation to the next. With such a lawyer’s help, the wishes of the retiring family member may be honored while giving the new owners what they need to make the business thrive.

Source: High Plains/Midwest Ag Journal, “Planning a successful transition from a family operation to an agricultural business“, Kylene Scott, July 29, 2013

Categories: Estate Planning

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