Is Your Succession Plan Going To Leave A Mess For Your Family?
22 Dec 2335 min 7 sec

We proudly say in Agriculture that 97% of America’s farms are family operations. That’s cool. But these farms are also businesses. With a lot of moving parts. And, a boat load of financial capital in play along with hefty assets. Sadly, about 80% of farming operations don’t have a succession plan in place. That’s irresponsible from a business perspective but it’s even more damaging — in many cases — for the family relationships that make the farm go. Ben Hansen with Gross & Company of Iowa joins Damian to discuss the legal, financial, and personal side of estate planning. Farming is your legacy. Is your family and that legacy worth protecting? Get answers and ideas in this business themed episode of Cutting The Curve!

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00:00 Is your succession plan going to leave a mess for your family? That's the question we're going to delve into today and give you answers and 00:08 solutions that you can take to your farming business operation to make it better, more peaceful and better for the next generation. Welcome 00:16 To Extreme ags cutting the curve more than just a podcast. It's the place for insights and information you can apply immediately to your 00:24 farming operation for increased success. This episode of Cutting the Curve is brought to you by Ag Explorer with innovative products that improve fertilizer efficiency, protect yield potential, 00:34 and reduce stress. Ag Explorer helps growers maximize field potential. Find out how Ag Explorer can help you get more out of your 00:44 And now, here's your host, Damien Mason. Hey there. Welcome to another fantastic episode, oft extreme eyes Cutting the curve. It's me, your host, Damien Mason. 00:54 You knew that. And I've got Ben Hanssen with Gross and Company, an accounting firm that does a tremendous amount of agricultural work out of 01:01 Dunlap, Iowa. Ben and I know one another in fact, uh, because of the extreme ag work we do. And he does the work for Kelly Garrett. And I said, you know what, Ben? I've been around this my whole life. 01:11 I've talked about it in my own business of agriculture podcast a number of times. And I said, farm people, hardworking people, 01:17 they want to go out and they'll do everything they can to maximize the resources on their land and and maximize the returns on their, on capital investment. 01:26 But you know what? They somehow, and this is not just farmers. It is not just farmers. It's everybody. 01:31 When they talk about death and you talk about the next thing, you talk about planning for retirement, 01:36 you talk about planning for what happens next. Farmers are worse than average, and most people are not very good at to begin with. They like hide. 01:43 Put your head in the sand that will not leave your family. A very good situation. We've all seen it. You've been to the auctions, 01:51 you've been to the coffee shop, you've been to the county fair, you've been to the funeral home where it's an absolute spat, it's a feud, 01:57 it's a mess. Are you going to leave that sort of financial wake of disaster for your family? Ben Hanssen, gross and Company, as you say, 02:07 you are the company in gross and company. You've seen it and, and, and you're not telling any, 02:13 any horror stories and you're not talking about anybody behind their back. We all see it. Why the hell does this happen? 02:21 Damien, thanks for having me. First of all, I, uh, appreciate the opportunity to visit with you this morning. Um, and this is a, a very interesting conversation and it's, you know, 02:30 really a hard one to have in general with people because the thought of succession planning means, you know, retirement potentially, right? Or, 02:39 you know, worst cases, mortality, right? And no longer being with us. And so people don't necessarily like to think about that stuff. Um, 02:48 they don't like to talk about it. They don't like to share, you know, their thoughts with their family. Um, but I think, you know, 02:53 the more that you can talk about it, the better off, you know, you'll be from a, um, a mental state of mind, just, you know, long term to know that, hey, 03:02 I have a plan in place. You know, my family can stay together. We don't have to worry about them, you know, 03:07 arguing over their assets or my assets or my family's assets once I'm no longer around here. Um, and to, to, you know, just like, 03:17 you know, putting your crop in and taking it out. You set up a plan with your agronomist. Um, you know, the bigger picture is that you, you do all this work, you know, 03:26 on a year to year basis, day-to-day basis. Um, but if you don't, you know, plan to what happens to it after you're no longer with us, 03:34 you've done all this work, um, just to leave a mess for your family, just like you said, David. 03:39 So there's a stat, I had a guy on my business of agriculture podcast and, uh, and, and he's, he works with, and, and he's not accountant. 03:47 He's more of like a advisor in a business capacity. And he, he gets that, the personal level of it. 03:53 But he says the stat he has is 77% of farming operations North America have no, uh, succession plan. If that's true, and I believe it's close, 04:03 uh, that's tragic. It is terrible. And I would actually say that the number is maybe greater than that. Maybe that 80, 85%. Mm-hmm. Um, 04:14 and that's just me pulling it outta my back pocket compared to, um, you know, when you initially see, you know, an ag family and, you know, 04:22 having a plan is one thing, um, a succession plan, but actually having the the correct pieces in place to make it happen is, you know, is another thing. And you may talk about, well, 04:33 this kid gets this piece of ground, you know, I'm gonna have my son, um, buy, you know, my equipment from me. Um, but you know, when, right, when does, 04:42 you know, the equipment process start, right? When does, um, you know, what's your last crop here? And actually sticking to it, being transparent to, 04:51 um, your, you know, your family members one, but also you know, your bank or your attorney, your accountant, um, 04:58 that they can help you put the correct plan in place so that you know, it's not quite so burdensome when you do decide to retire and, 05:05 and put your sec succession plan in place. We talked about, you said the reason why, uh, folks neglected, and it's not just farm people, but farm people are the worst. 05:15 I I think they're worse. And I'll tell you the other thing, they tend to have more assets. So, you know, thing farmers, you know, 05:21 live cash poor, but asset rich and all that. So if, if that's what you have and that's what you value, why don't you value managing it for the next generation or whatever that should 05:32 be. Maybe it's, maybe you have no kids like me. Okay, fine. Well then I'd rather that I be in charge of it and my wife be in charge of it 05:41 than the court. And so, right. You know, if it's the most valuable thing you have, you should manage it. And I think that, um, the, 05:51 the problem that I see is they just hate addressing. And it also, if you had, if you owned four dry cleaners, you know, 06:01 I always use these kinds of examples. Say you own four dry cleaners, you probably had this idea, okay, 06:07 it's a family owned business just like the farm, but there's less emotion. You know, it's usually like, all right, 06:12 I've got three kids and I have four dry cleaners and you know, my back shot. I've been standing here pressing, you know, shirts for 35 years. 06:20 There's less emotion about it than there is about the damn grain bin and the barn on the hill and, you know, 06:26 grandma Whitaker's house and all that kind of thing. So is it the emotion? Is it the too tight family thing? 06:32 Why is it so unaddressed? I think it is the emotion, you know, like you have a, a business that you maybe, you know, buy during your lifetime, it probably wasn't your family's, um, 06:44 you bought it to, to make money, um, to have a career, to do something that you were passionate about, hopefully. And then ultimately, you know, when you sell it, you're like, Hey, this can go to the next person. 06:55 Hopefully maximize your value. Um, from a, a farm perspective, you know, you may have been born on that farm. You may have, um, 07:03 raised your family on that farm, um, and then you, you care for it. So I think the, the breed of people, um, 07:10 that are farmers in general care a lot more about, um, their, their, their business that they have and, 07:19 and the thought of actually giving it up, I, you know, crushes them to some extent, right? Um, but you know, my, my thought is, you know, this is succession. It's the, 07:30 the possibility of passing it on to the next generation or to someone else that will care for that care for that land and your crop the same way you did. 07:40 And you can pass on that, that, uh, that knowledge that you have. Um, you know, I, I really think about succession plan and, you know, three different phases. 07:50 Um, one phase is, you know, while you are, you know, farming and, and in the process of, um, you know, 07:57 of generating your farm business and growing your farm business, you know, which means, you know, do you have the proper life insurance? Do you have, 08:04 you know, a catastrophe plan put together, put together? Um, so that if if something does happen to you while you're in operation, 08:11 that you know, your wife or your attorney or whoever it is knows, you know, the the 20 checklist items that they need to go to, you know, 08:19 where are you selling your grain at? Where do you have, um, you know, dead at, you know, and, and Damon, I, I can go through my next two if you want, or, well, 08:27 I Want, I want us to start with that one, okay? 'cause now way we've described why it happens, all that, let's be honest, it's irresponsible to not have these things buttoned up. And, you know, 08:37 we don't delve into this a lot, Ben, you know, you keep up with extreme ag. A lot of our stuff is about nutrient you allocation and the right machinery and 08:45 the right placement of, uh, products and, and maximizing agronomics. We don't dig in this, 08:51 but we have a subset of episodes where it's the business side of farming, right? 08:56 And to pretend that you shouldn't pay attention to the business side of farming is just ridiculous. You do the hard work, you'll wake up early, 09:01 you'll go out and you'll, you'll sacrifice your, your back doing this stuff. But there's a business side of this. 09:07 And so that's why I've got my business book back here in the background, because I want to delve into it. So now you just brought up number one, 09:13 number one succession. Everybody thinks, well, that's when I'm 80. Well, okay, we still are in a business where we're like third in terms of 09:24 accidents, right? Uh, you know, mining and construction and, and, and farming. Let's say it something gotta know, you know, terrible happens and you're dead. 09:34 My brother was a farmer and was getting ready to take a trip. He said, oh, hey, by the way, on the way out the door, after having six drinks, said, by the way, 09:43 you know, something happens. And he ran through like 30 things that I was supposed to handle. I said, is this documented anywhere? Am I legally even allowed to do that? 09:52 I'm supposed to liquidate your livestock. Am I even allowed to? Am I power of attorney? Do I have, am I, am I, am I even on the paperwork? 10:00 Am I the executor of the estate? Well, you know, you know what to do. And I think that's not an uncommon thing. Like, oh, you know, uh, 10:07 just you take care of this when I'm, if I, something happens. So let's talk about that. What happens if, what do you, what do you need to, 10:13 what should people do if something happens Or, or before something happens? What I'm saying, Really, right? I'm saying, so, okay, I've got, 10:21 right now the responsible thing to do is I have an ongoing operation. I've got crops, acres, debt equipment, kids, 10:30 livestock. What should I do to make sure that if all of a sudden I get hit by, uh, you know, I I I run over myself with a combine, what should I know? 10:39 You know, there's, you know, from a very, very high level, you know, my, my number one recommendation is that you have, you know, a will, right? 10:46 Because your will will dictate a lot of, you know, what can be done with your estate, right? You know, so who can make decisions upon you know, 10:56 your demise and act in the best interest of your, your farm operation? You know, that's, you know, you know, number one, probably most important, 11:04 you know, so I like to go on vacation and, you know, I seems like, you know, when I'm on vacation, you may do a little bit more risky things. 11:11 You're in a plane, you may go skydiving, something like that. Um, so I, I did get a will update and it makes you think about a lot of these things. Um, 11:20 you know, so that I'd say number one, number two, I would put together, you know, that, you know, the, the, the day in the life of, you know, 11:28 the farmer, you know, what, who do you deal with on a day-to-day basis? Um, you know, that, that would know what's going on with your operation. 11:37 So that person that is your power of attorney, whether it's your spouse, whether it's your best friend, whether it's your attorney, 11:44 that they'll know these are the 25 people that we should contact, um, to make sure that we've got all the loose ends buttoned up. Um, 11:53 and then finally, I think you should actually visit with those people, um, so that they know what that process, you know, looks like. Um, you know, 12:01 a lot of times, you know that it may be your accountant or banker or attorney, so they know who, who they're deal dealing with, but that person knows, Hey, 12:09 this is my intermediary. Um, um, and or these are the people that I, I deal a lot with. Um, so you should know them. And if something Matt happens to me, 12:20 I really want you to work closely with them to, you know, tie up my loose ends. Yeah. It's, it's mostly then the legal aspect of it. And we, 12:29 you're not an attorney, nor am I, but there's this fear of going there. But in most communities, there's an attorney group, 12:38 and maybe it's not in your little town, maybe it's, you know, in Omaha, maybe it's wherever. But the point is, 12:43 there's an attorney group that probably does a lot of agricultural transition 12:49 And That, and, and it's, we live in an internet world. In other words, it doesn't have to be, you know, in the little town of Bipas, 12:57 four miles from my farm here. Maybe it's in Indianapolis. But the point is, there are attorneys that specialize in this, and they probably, if you walk, 13:04 if you do the work and schedule the meeting, we'll walk you through, Hey, the first thing you should do, like you say, Ben, 13:09 is who's the two dozen people that need notified? Who is the power of attorney? If you're hitting a car accident and you're, you're injured, 13:17 but still alive 'cause power of attorney can make the decisions, right? So that's what you're talking about. That's the first thing, 13:22 is setting those things up. Yeah. You know, the other thing that I think about a lot with farmers as I have this discussions with them is they, 13:30 they have a lot of these plans in their mind that they're like, Hey, you know, this guy down the road here, he's, he's helped me for years and years and years. 13:38 I've always told 'em that if something happens to me, then I'm gonna cut him. I'm gonna cut him a deal on this. Right? Well, unfortunately, 13:46 if it's never been wrote down or documented or put in your will, it doesn't matter, you know, what you've said or discussed, 13:53 because then it's hearsay. And once you're no longer with us, that can't be executed. Right? If it's in your, if it's in your trust, 14:00 It, again, it's, it's, it's somewhere between irresponsible or naive. Because I have heard that no less than six dozen times I've heard 14:09 it in my neighborhood. We bought this place, we bought this farm bin, and after the clo we were, we were renovating it. 14:17 And an attorney called me up and said he got a call from a guy that used to work over here as a hired hand. 14:24 And he was told in the eighties or nineties that he was supposed to have first chance to buy this. And here he finds out, 'cause he reads in the paper that Damien and Lori Mason had bought the place. 14:35 I said, okay. I said, what the hell am I supposed to do? But he says, well, there's no documentation, there's, this is not something recorded. I said, well, 14:41 clearly it was not that exact thing happened. And right, by the way, you wonder if it's naivete or you wonder if it's almost like that person was 14:52 using them. Hey, you know what, I'm, you're not, you're, you know, you're coming over and helping me out for free, but you know what, 14:58 someday I'm gonna give you first chance to buy this. Is it, are they screwing them or is it that they really genuinely believe that telling 15:04 them that is gonna make it happen? Right. It's just that they never got around to it, potentially. Right. Or, you know, some people, you know, I, 15:12 I like to believe that the good in all people, right, some people just may have, you know, not truly meant it. Right. Um, or if you, or if you, 15:21 or if you help me for so long, then I will, you know, do this on your behalf. And, you know, a lot of people like to do things on a, 15:30 on a handshake agreement, but you know, that handshake doesn't matter. Um, you know, if you're no longer with us or if you can't execute 15:39 A handshake, agreement's fine on buying a load of hay. Uh, right. Handshake agreement on transitioning a couple million dollars of agricultural 15:47 asset is a legal math or, so the right answer is if you really want to do that, if you want to help out the guy down the road, 15:54 the guy and his wife down the road that you've been friends with and you've always had a good relationship with, what do you do? 16:00 You can put in your will that they get first right. To buy at 20% reduction, uh, of a 20% less than appraised value that can do that. Right? 16:10 Absolutely. They absolutely can. Essentially, you can do about anything within the, the terms of your, your estate that you want to, um, as long as you're under the, 16:20 the estate exemption. So we won't, um, we won't get too far into that, but yeah, your, your assets can go to non-family members. 16:27 As I like to tell a lot of my clients, you know, they can gift up to $17,000 a year to their kids, um, to their hairdresser, to their accountant, my kids, how much whoever they want, 16:39 $17,000 Without any tax obligation. Now, the thing is, let's say that that always scares people. 'cause then they think, well, I'm not ready to give my money away. That doesn't, you don't have to. 16:49 You can also, again, you can set up a legal instrument, make, help me out here. 16:54 If I wanna make sure that my buddy down the road gets first chance to buy this property at 25% off of market price, I can stipulate all that. Correct. 17:04 You absolutely can. You can put that as a, a separate item within your, your will. Um, or even in your trust, 17:10 if you have one set up that you can establish, you know, who will buy something, you can even fix it for a certain value. So say ground's going for, you know, 17:18 $10,000 an acre, um, and you wanna sell it to your neighbor for six because he is been so good to you, you absolutely can do that. You can fix the price if you want, 17:29 or you can say, must be appraised and we're gonna give 'em a 20% discount so they have the first right to, to buy it. They may say they don't want to. Right, right, 17:37 Right. Then, uh, so there's the let's get past the intimidation factor and Okay. Because in other words, you, you can do about anything. Right. You know, 17:46 not as long as it's legal, you can do about anything through legal instruments, as long as it's not breaking the law. The other part of it is, uh, 17:53 always saying something doesn't fix anything. Yeah. He always told me that he was gonna do this. Well, that doesn't do anything. 'cause we know that that happens. Hey, I told my kids, I told my kids this. 18:02 Like, is that documented anywhere? Right. Right. As long as someone can shake your hand and they're there to shake your hand, you can believe them. But when they're no longer with us, 18:12 then it really comes down to if it's in writing. Yeah. And, and not, and not even just like written down and like scribbled in a in a drawer in the, 18:19 in the chest of drawers. It's gotta be actually legally documented. Yeah. I would say the back of the napkin, you know, 18:24 type deal doesn't work out great here. 'cause you know, then they can be contested. I would say that you, you probably need to have a legal document, you know, 18:32 even even the first right of refusal of some sort document that's not necessarily in your will drafted by an attorney, 18:39 which they'd have a better idea exactly what those documents are to say, Hey, upon my demise or in this year, 18:46 this person has the right to buy it, this, this asset, whatever it is at X price. So let's talk about then we said, 18:53 is your succession plan leaving a mess for your family? What are the messes? I mean, the first one is having no plan, right? Yeah. And, and, and, and also, 19:01 well, I always said, always saying or telling the people at the Thanksgiving dinner table, that is not a, that is not business. That is, that is, that is, again, 19:12 it's, it's irresponsible to think that that has handled anything. That's number one. And two, 19:16 to not have a plan and to order or think that somehow telling somebody is actually doing it and fixing it. We've just given examples. 19:22 Third thing I think that leaves a mess, and I want your take on this, is, um, not unclear communication. Uh, you know, especially when you're siblings, 19:32 et cetera, and your offspring. So kind of address that please, Ben. Yeah. So, you know, that's really, 19:40 let's say that you go through retirement or you get to succession, um, and at the time of retirement and you, 19:48 you gift a bunch of your assets to maybe the one sons that that's working for you. Um, 19:54 and that's you and your wife or just you's decision to do that. Um, and you, you aren't fully transparent to your other kids. 20:03 A lot of times it causes a lot of animosity, right. Of, you know, saying, well, why, you know, what was the reason? And, you know, 20:10 once you're no longer with us and they find, you know, your kids may find this thing, this thing out, um, or your kids that aren't involved, you know, they get, you know, 20:19 to some extent very jealous. They don't understand, you know, why you made that decision. Um, 20:24 and to the extent that you can explain to them, this is why I've done what I have, or here's how I have everything set up and here's how I believe it's, you know, 20:34 fair, um, is important to discuss with your family, just to keep everyone together. If that's, you know, truly what your goal is after you're no longer with us, um, you know, 20:46 we, you've had the scenario that, you know, let's just say 40 acres goes to, um, to auction. And, you know, one son thought he was gonna buy it, right? Well, 20:55 that son once again said, dad said I'd have the right to buy it at X. He never put it in writing. Mm-hmm. His, you know, went to the, 21:03 the court system and they said, well, all the siblings have to decide on what the price is gonna be. Well, it seems like you always have maybe that one sibling that says, Nope, 21:14 mom and dad wanted us to sell it at market. And if you want to pay fair market value for it, you can buy it then. And so then, then it ends up that that family never talks again. 21:24 They may not get the other again. Um, especially, you know, so it, it's not the perfect scenario and there's never probably a perfect scenario. 21:32 But a lot of people or farmers in that, that that succession plan avoids the conversation. 'cause they, they know that it will create some tension. Mm-hmm. 21:45 Yeah. Well that's exactly what happened. So they, they avoid it and avoid it, avoid it, and then die. And then, then it becomes a, a, a, 21:51 it was a ticking time bomb that finally blew up. I've lived it. So other ways to avoid, uh, mess. Now gimme the, gimme the solution. 21:58 We've got people here listening. They, they've stuck with our thing, the business side of farming. What's the solution? How do we avoid these messes? 22:04 So we talked about communication, we talked about obviously having a legal, having it legally handled, but you said 80% don't. 22:11 Right? Uh, what else? Let's talk about the money. The account. You're the accountant, not the attorney. So let's talk about the accounting side of it. 22:18 The accounting side of it is, you know, I, like I said earlier, there's like three phases of, you know, the succession plan. There's, 22:26 while you're operating, you know, when you truly are ready to retire. And to, to give your accountant, banker, um, 22:35 attorney the foresight of saying, Hey, my last crops in five years, here's my plan. Help me out with developing the best plan that you can. 22:43 Um, it seems like to me, my, you know, I might have some clients come in and they're like, I've figured out my plan. And they essentially, you know, their first comment is, 22:52 I'm gonna sell my equipment on contract. And I, I just lean back in my chair and I say, I've already blown up your plan. 'cause their thought is that they're gonna sell their equipment on a contract 23:02 and they're gonna pick up this gain over the term of the contract. Well, unfortunately, the i r s doesn't like, um, 23:09 you putting equipment on contracts 'cause they call it a hot asset and it's all taxable in year one. Mm-hmm. 23:16 So it seems like we maybe have to unwind that thing. Um, whereas it, if they've already done it, that's like rule number one. I tell, 23:24 tell a lot of my clients, I'm like, don't call me after you did something. Do me a favor and call me while you're planning and I can help you set it up 23:31 correctly. Um, or at least give you the tax advice so that we can tell the attorney to, to set it up correctly. Um, so yeah, by the 23:40 Way, that's an, that's an interesting one is, hey, I did this because the guy I'm buddies with at the coffee shop said that's what you should do. And then you sit back in here and say, 23:49 I'm the person that's a professional accountant that looks at farm books every day. You didn't think that you'd consult me, 23:56 but your buddy at the coffee shop told you that. No, you just cost yourself hundreds of thousands of dollars. You've had to have that coffee, haven't you? 24:04 Not quite that bad. But, um, typically they've been, yeah, my attorney's, Dr. You know, drawing this up right now. And it's like, Hey, let's pump the brakes. 24:11 We need to, you know, think about this a little, a little bit, right? And, you know, a lot of times for people it does come down to cost, which, you know, 24:18 just baffle me, baffles me that they're like, well, I don't want to pay for this advice. It's like, yeah, but you'll, you know, pay, you know, 200 bucks an acre for fertilizer. It's like, hey, let's, you know, 24:28 try to figure out our, our our values here and what's important. So I, I didn't generally tell that person that they get what they pay for, right. 24:36 You know, that person at the coffee shop, you know, charge 'em nothing and they really got nothing out of it. Um, so yeah, planning in advance is, is a big deal. Let's just talk about, you know, 24:46 the best way to do this and we can help you structure it correctly so that Uncle Sam isn't, isn't quite in your back pocket as much as you think they should be, 24:55 or, or they aren't in your back pocket any more than they should be, right? Right. So then the other one about from the accounting standpoint is, 25:04 you know, you talk about the depreciations and the appreciations and all that kind of stuff. You, you know, a lot of these guys, uh, 25:11 and and gals that are out here that have assets and they're, you know, late, late middle age, you know, approaching, you know, 25:18 the thought of succession planning. There's a lot of assets to, to manage. Um, and then there is a concern that they might think, 25:26 but I need an income. You know, that's the thing. Like, they, they, okay, I'm ready to hand things over to the kids, which farmers don't like to do. Uh, 25:34 I'm 70, but I need money. So what's your advice to those people so that the financial, the financials are okay and the succession plan is also okay. 25:44 And so from that perspective is you really have to go back to, um, what's your cost of living? So we try to work backwards to say, 25:53 how much money do you need on an annual basis or, or even better on a monthly basis to survive. And then let's make sure you can, you know, properly retire and, 26:06 and generate the plan that you want. Um, you know, because if you don't truly know what you need, you know, it's gonna provide for some dissatisfaction or dissatisfier 26:16 down the road, um, of saying, well, my accountant told me I had to do this and, um, I didn't get good advice. And, and well, 26:24 maybe it was the fact that you didn't give them good information on the, the front end to help them plan to make sure that they have the correct amount 26:32 of income during retirement. And, you know, you can set that up in multiple ways. Is your land rent, you know, proper? Is it, you know, the amount that you need, um, is your equipment, you know, the, 26:43 the least to buy, you know, contract correctly. And, um, you know, at the age of 70, you know, what is, you know, what's your social security like? 26:51 What do you have for other investments? What are all these pieces of the pie that are coming in that will allow you to live comfortably, you know, 26:59 throughout retirement due to things that you truly enjoy. Mm-hmm. Yeah. Uh, all right. Let's get outta here on preventing a mess. 27:08 You just talked about the money stuff we're talking about. Obviously the, the main thing we started with, we started with when we're in with it obviously, 27:13 is that, you know, telling somebody something doesn't do anything Right. 27:17 Saying to the kid. But the big one then is the non-farming siblings. The ones that leave a mess are, uh, and I've heard the stories and you know, 27:27 I've seen the speakers that talk about this on the ag circuit. Uh, you know, the guy that's your age or my age that's been working back at the farm for 25 27:35 years, then all of a sudden finds out when mom and dad die, he has to buy out his three sisters that moved to Chicago 27:44 who haven't been on the farm since they went away to college at market price. And he doesn't have any way of doing that. 27:50 'cause only only thing he has is 25% of, uh, you know, so like all of a sudden it's like you just, you just invented a situation that, oh, I want my son to stay in farm. It's impossible. He has to come 28:01 Up. He can't, he can't period. He has come up $5 million to buy out his three sisters and he can't do that. So what's your advice there? 28:10 I think, I think it gets back to what we were just talking about, you know, to have to have a true plan. 28:15 And I think if you take anything away from this conversation is that a failure to plan is a plan to fail, right? And so if you can plan in advance, 28:25 you can, you know, not farm until you know, your mid eighties and, and not pass anything on to your kids, um, you know, 28:32 or kid that's been helping you make sure they're involved from a young age. Um, you know, your, your next farm that you buy, you know, 28:39 if you're 70 years old or 65 years old, well, maybe that's an opportunity for the youngster, right? He may not have the financial backing to necessarily do it, 28:48 but you can help him get started. Um, you know, set the things up in your, in your will or start transferring assets, um, during the, 28:57 the time when you're alive. And yeah, there's tax consequences that go with those at times. Um, but if you do it efficiently, you know, 29:05 you took the deduction for the equipment, so you know, why not, you know, when you have the cash in your pocket, if your, your son or daughter is, 29:12 is buying you out, you have to pay a little bit of tax at that time. Um, but yeah, it's, 29:17 it's one of those things that if you really develop a plan and you truly want your son or daughter to farm with you and farm for a long time, you know, 29:26 it may come down to having to give them some gifts in advance of your, um, your demise, um, and, 29:33 and then equal it out a different way with your other kids if you need to. Right? So that's, you know, my advice is, you know, set up your plan, 29:40 put your plan into place, um, and, and if everything comes to fruition that you live to the right old, old age of 90, and all you own is a little bit of land yet, um, that's perfect. 29:50 And your son can farm and you can help him and watch Him. Daughter, daughter, daughter, Daughter, son and daughter have done good about that thus far. I mean, 29:57 it is really important that you give them that opportunity. Yeah. Um, and I think more and more it's, you know, you get to that age of, you know, 30:05 55, 60 years old, and you have, you know, the youngster that's been with you for a while, let's start giving them opportunities to, um, you know, 30:14 make some of those big decisions. Because, you know, if you're 85 years old, most likely you had that child when you were 20 to 30 years old. You know, 30:22 that person is, you know, getting to the point where they need to maybe think about, you know, retiring since succession. And, 30:28 and that just seems like more than someone wants to, you know, bite off at that age. Right? So it's, I'm 30:34 Gonna throw another one out there though. You know, in all honesty, uh, sometimes there's the lazy son and daughter that are entitled and, 30:42 and all that, but there's the other ones that just wanna farm and not address the business also. 30:48 And all of a sudden you're talking about 30 and 40 year old people that are working in a family farming operation, 30:55 and they've never said, Hey, you know what we need to do, set up a legal structure. What, what, you know, here's my compensation, 31:03 you know, what am I being paid and how are we doing this? And when I kinda start buying in, 31:06 sometimes you do need to blame the generation that's coming up for not being more forceful and forthright about what their objectives 31:17 or goals are to say, you know what? If this is a business, let's run it as such. And, and I'm not being mean, I'm not being disrespectful to the, the, uh, 31:25 the hierarchy, but let's face it, there's people that are 40 years old that still say, oh, I don't know. I I, it looks like I'm gonna get screwed. We do something about it. 31:35 Yeah. Fix some of your own problems to the extent you can, but, you know, it made it, you know, 31:39 it seems like it's a generational thing that I've always been, my dad taught me to just listen, you know, I li he listened to his dad. Um, 31:47 and it's a, it's a tough conversation to have. Um, and I, but I think it also comes from the, the older generation, the, the hierarchy of, 31:56 of saying, Hey, I need to give up some control. Right? Which is a really, really hard thing to do in general, is to give up that control, 32:04 especially when they may have not been doing it the exact way that you would've done it. Right? But as long as the crop still gets planted, 32:12 it still gets harvested, it gets marketed well, um, you know, those are the things that, that you care about. And then, you know, 32:20 ultimately passing it down to the next generation, if they're, if they're not ready at the age of 35 40, 32:25 who says they're gonna be ready at the age of 55 60? Well, precisely. So, so then you got ask the questions like, wait a minute. Uh, if somehow your 40 year old isn't in capable of making decisions of being 32:37 involved, then maybe they're not the right person to hand things off to anyhow. Right. It's crazy. The farming, you know, 32:44 farming business in general has grown so much over the last 20 years from the size of numbers that you're dealing with. You know, I, 32:52 you used to be able to maybe put in a crop for 3, 4, 500 bucks an acre. I mean, now if you have to pay your rent in March and pay for all your inputs, 33:01 you may be looking at a thousand bucks an acre. Yeah. So you're dealing with large line of credits. Um, land is much more expensive. Equipment's much more expensive. 33:10 And if you get to the age of 55 and you've never had to do any of that stuff, who says that someone's going to give you the, the, 33:17 the money to do it if you have to borrow a bunch of it, right? So you need to prove a track record to get to where you wanna be. 33:23 I like leaving it right there. That brought the generational thing together. If you're 55 years old and you're still just the grain card operator and you're 33:31 not in, in involved in the business part of it, uh, it is time to, it is time to go to business, it's time to do crash course on the business side, 33:39 but that's what this is here. Little, uh, a little subseries within the Cutting the curve episodes. We talk about the business side of farming. His name is Ben Hanssen. Are you, 33:47 uh, are you available if somebody says, I wanna dig deeper into this, obviously for, for fee, because you, you can't, you can't be the, uh, 33:54 ag accountant for free. Uh, how do they find you? Yeah, they can find us at grossing company. Um, we're in Dunlap, Iowa. We are, we're taking on consulting roles, um, more or less to say, Hey, 34:06 let's make sure that we can, you know, help you through this transition. Um, not necessarily looking for new tax clients or monthly bookkeeping work, 34:15 um, but you know, more of the big picture of like, Hey, let's look and see how you're structured. Let's see what, what are your goals? And have those, those conversations and see if we can't get, get, uh, 34:25 a plan put together to help you. Thanks So much for being here. His name is Ben Hanssen from Gross and Company Dunlap, Iowa, talking about the business side of farming. Till next time, 34:33 thanks for being here, Ben. Thanks Damien for having me. Appreciate it. You Bet. It's extreme ag cutting the 34:39 Curve. Thanks for listening to another edition of Cutting the Curve. For more insights and information that you can apply to your farming operation, 34:45 visit Extreme Are your crops stressed out? Ag Explorer has you covered with a full line of products designed to reduce crop stress and improve yields. 34:55 Check out ag and start protecting your yields and.