Planning for the future of your farm can be complicated enough without the bumps in the road life tends to produce. Now imagine that bump being a roadblock. There is, however, planning that can still be done for those instances. For the prepared business owner, they come in the form of buy/sell agreements.
A buy/sell agreement is a contract that provides for the sale of a business interest (including a farm) when a triggering event occurs such as the death, disability or retirement of a farmer. Below are the specifics to help determine if a buy/sell agreement should be considered:
• The benefits: When a triggering event occurs, the buy/sell agreement enables those in the arrangement to continue the operation in harmony since the event has already been planned for. The agreement allows everyone to maintain ownership and control, and safeguards against someone now being forced into the farm operation that doesn’t have an interest in participating, for example, a child or widow. Also, depending on how the agreement is structured, it provides sufficient cash to be immediately available to carry out necessary transactions or to provide liquidity for estate expenses.
Questions to ask yourself
To better help determine if you should consider a buy/sell agreement, here are some questions to ask yourself.
• With no agreement in place might your family or partner’s family make unreasonable demands?
• Are you concerned about your family being neglected if you aren’t in the picture and there is no agreement in place?
• Do you want to be in business with your partner’s spouse or child?
How else these agreements are used
In addition to using buy/sell agreements for farms with multiple owners, these arrangements are also used in sound business and estate planning when the single owner (or married owners) of a farm would like to pass on their land and operation to their heirs so that they may carry it on. This method has proven to be effective in providing widowed spouses with income in retirement or to aid in the transition of a farm or ranch to the next generation.
When thinking about buy/sell agreements or other business planning strategies, it’s important to enlist the help of qualified professionals who don’t have a stake in the final decisions. Qualified professionals may include a banker, accountant, personal attorney or a financial or estate planner. For help in finding a qualified professional to speak with, contact the Nationwide Land As Your Legacy team at [email protected] or toll-free at 855-529-2729.