Pauley discusses succession planning

Joining and/or taking over the family business is never a decision that should be made lightly, as it can hold great rewards and come with great risks.

Blurred lines between family and business roles and goals create complexities which can result in family-ending conflicts and business disasters.

Wyoming Department of Agriculture Mediation Coordinator Lucy Pauley discussed succession planning at the 2024 Fremont County Farm and Ranch Days held in Riverton Feb. 7-8.

Pauley began the break-out session by identifying succession planning, which is transferring management and decision making from one generation to the next. 

She said, “An estate plan deals with the accumulation, preservation and distribution of assets over a person’s life, whereas a succession plan focuses on the shift in a business’s management responsibilities from one person to another.”

Succession planning can also cover the transfer to an individual outside of the family, in the case nobody wants to take over the entity.

Finances 

Succession is a family matter and a business decision, and mixing the two realms often means tackling difficult conversations.

“This can be what stops people from going further into this process – trying to get a handle on what the finances look like,” Pauley stated.

She noted there are experts who offer financial counseling to support producers as they walk through this process.

“A lot of producers probably have an accountant or financial planner,” she said. “This is a good time to bring them in and start looking at what they need to have available in resources and how they contribute to the operation.”

Another important component Pauley explained is getting professional tax advice, noting taxes can be a huge reason to do succession planning.

Individuals who plan on inheriting land from their parents may still find themselves burdened by estate tax.

Pauley said, “Currently, there are organizations with programs which can help the next generation get some financial resources they can contribute to the operation.”

Creating a succession plan is a complicated process, and families must navigate legalese, tax burdens and financial planning. 

Seeking help from experts, like financial planners, lawyers and lenders during this process will ensure a successful farm succession plan which can withstand the test of time.

Communication

“This is where I come in,” Pauley noted. “Communication can be a huge issue in succession planning.”

Communication is a tough barrier, and families have to open up about what they want to do with the operation in the future.

Having tough conversations often requires a facilitator or mediator, and mediation has been shown to be a helpful tool when making plans for the future or managing important relationships.

“We have a ton of resources for families, and we have some great tools and guides on starting tough conversations and how to ask family members questions,” she explains. “The biggest issue I face when helping families with succession planning is communicating about fairness.”

One resource Pauley suggests is utilizing Ag Legacy, a program to assist rural families in creating their own legacy by beginning the thought process and opening the lines of communication. 

According to the Ag Legacy website, the program consists of a series of online modules related to communication, transferring management skills and end of life planning and are paired with related newsletters, bulletins and other instructional materials.

She said, “I like to encourage people to look at what other families have done and talk to folks they know who have gone down this path of succession planning and find out how they have handled some of these topics.”

To read about some real-life farm and ranch transitions, Pauley suggested obtaining a copy of the “Western Farm and Ranch Transition Strategies” book. 

The book contains interviews from families around the West who worked through succession planning.

“Sometimes reading about other people’s examples can ignite some ideas of your own and help you figure out what you want to do next,” she said.

Certified coordinators

The Mediation Program now has five mediators who have completed training to become a certified farm succession coordinator through the International Farm Transition Network.

“In mediation, we try to help people really focus on the future,” Pauley remarked. “It’s important to get issues worked out right now, but I also want them to talk about what happens in five years when another issue pops up.”

Families may be at various stages in the transition of their operation – identifying a successor, transferring management responsibilities, structuring estate plans or just getting started – but a certified farm succession coordinator can help at each step.

Succession coordinators work with families and operations to navigate the process of transitioning an ag operation to the next generation, which involves more than just a business structure or an estate plan, it also includes management transfer, inheritance issues, feelings and emotions.

Currently, there is no charge for using a farm succession coordinator through the mediation program.

“This is not an overnight process. It could be several years before everything gets established. The hardest thing we see is producers taking the first step,” she concluded.

Melissa Anderson is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.