Carr’s Capital: October 2010
By Milt Carr and Associates
Family Harmony Succession Planning Part II
By Milt Carr and Associates
How do you achieve family harmony? In my last article, I had mentioned
having a proper financial structure so the siblings can get along. This
structure would create an environment where one child could take over
the farm, and the other non-farming siblings would be treated fairly.
How do you achieve family harmony? In my last article, I had mentioned having a proper financial structure so the siblings can get along. This structure would create an environment where one child could take over the farm, and the other non-farming siblings would be treated fairly. Having such a financial structure would, in essence, be the foundation for creating what is known as family harmony.
While this family harmony issue is the responsibility of the parents, it can be transferred over to the child who is inheriting the farming operation. Why is this? Well, without a structured plan and communication document, the sibling who ends up with the farm feels as though he is inheriting the weight of the world. Not only will the sibling have to deal with the pressure of making sure the farm continues to be a success, but the sibling may also feel the burden of ensuring the day-to-day tasks are good for the entire family. As a result, when there is no structured plan in place, the pressure on the farming sibling often ends up creating a feeling of family discord. It is often best to ensure that a well-structured financial plan not only allows for technical solutions with respect to share structure, trust accounts, insurance plans, accountant techniques, wills and business agreements. A well-structured plan can create an environment where the family as a whole can discuss their own individual needs, allowing everyone to gain a better understanding on how the entire family is moving forward.
Allowing the family to go through this process creates a better appreciation and understanding for the future. This then paints a roadmap for the entire family so that everyone is on the same page, should any unexpected situations arise. Having a plan that addresses the present, while also allowing for a contingency plan for future events, works to solidify the foundation for family harmony.
A family harmony meeting is developed in the following way. First, mom and dad sit down with their consultant, and together they clearly document their goals, dreams, desires and legacy planning for their family. The next step in the process involves the child who will be taking over the family farm. In this meeting, the parents, along with their consultant, discuss their plan with the child who is acquiring the farm.
Once the parents and the child who is taking over the farm have decided on a plan and direction, they may find it prudent to share the plan with the other children in a family meeting. Usually this meeting does not include the spouses or grandchildren; rather, it is held in an environment comfortable for the parents and their children.
The personal nature of the meeting may prove to be awkward when more than the immediate family members and their advisors are present. The purpose of the family meeting is not to hear all opinions and try to accommodate everyone by giving them all what they want. Rather, it is a venue to communicate why the parents and the child who is taking over the farm have decided on the direction that they have taken. All children will be treated fairly, but not always equal. I have ideas on how to treat children fairly and keep the farm in the family.
My experience has been that when a logical plan is presented to family members, and their questions are heard and answered in a manner that creates a healthy discussion, they come to understand that the plan must happen in order to keep the farm. When the family participates in a give and take session from all family members, it is much easier to begin painting the road map to family harmony.
Once there seems to be a plan beginning to formulate with respect to the path the family farm is to take, the process moves on to the next level of meetings. Now, not all situations are the same, and not all family farms are structured in the same manner, so every case brings with it its own unique challenges. I suppose the greatest challenge is bringing the family together around one table to engage in open and frank discussions. At times, this task can seem rather daunting and intimidating, and perhaps this is why so many families put off having these kinds of discussions.
As I have mentioned before, fair does not necessarily mean equal. So, in working to address the desires of the parents, on the surface, their wishes may appear unfair. However when all of the future considerations are factored in, this will have a balancing effect that equalizes everything. A well-designed financial structure that includes consideration for family harmony will pave the way to keep the family farm in the family, while keeping the family reassured that they have a well-constructed route to take when unaccepted issues arise along the way.
If you have any questions or you would like to know more about family harmony issues, please send us an email to Milt Carr at firstname.lastname@example.org or to email@example.com