Transition Planning: The Coordinated Approach in Virginia
Farm Business Management Update, December 2001
By David Kohl, Jesse Richardson, and Alex White
September 11 was a date that changed many of our lives. On a positive note, it has motivated people take time to evaluate what is important, and to examine the directions and paths they are taking. According to a recent article published in the USA Today, the number of people requesting wills and updates to estate plans has increased 40 percent. People are analyzing life insurance policies and funeral arrangements as well.
The Virginia Department of Agriculture and Consumer Services (VDACS), Virginia Cooperative Extension (VCE), and leading agribusiness organizations in the state have joined in a coordinated effort to educate farm and family businesses in the area of transition planning.
Transition planning is a broad range of issues that impact the sustainability and lifestyle of the people involved. One of the first steps involves vision, mission, and goal setting from a business, family, and personal perspective.
Second, a financial and economic analysis is needed to determine the sustainability of the business over a period of time. This analysis is usually expanded to include the development of a total business plan. Included in the business plan is a market financial and operational analysis within a given set of capital, human, and natural resource bases. Some producers may elect to specialize or diversify within a given set of commodities. Others who have a market, location, or technical advantage may explore value-added opportunities.
Assessment of retirement planning and integration of outside equity interest in the transition may be pertinent to the planning process. Investment strategies for the younger generation are imperative. Funding for those golden years of the older generation needs to be included in the analysis as well.
Life, health, disability, and catastrophic health insurances are necessary risk management tools in the process. Of course, business organization, the estate, and tax planning must be examined and continually updated as regulations and laws change.
Finally, the comprehensive package must be balanced with the lifestyle that the individuals desire for themselves and their families, or as it effects outside interested parties. Successful execution of the plan depends on it.
What Is Being Done
Over the next six months, numerous educational opportunities will be available. First, VDACS with assistance from VCE will conduct two transition-planning seminars. The first will be held on December 6 in Weyers Cave and the second on December 11 in Keysville. Dr. Jesse Richardson from the Department of Urban Affairs and Planning, and Dr. Alex White from the Department of Near Environments will provide programs on estate tax planning and retirement planning. There programs will provide information on goal setting within the context of the family businesses. These seminars will be repeated in other locations across the state during 2002.
Second in January and March, the Virginia Farm Bureau and the Farm Credit Services will coordinate seminars, schools, and sessions in Lynchburg, Staunton, and Winchester discussing farm business transition. Information will be posted at www.vafb.com.
In addition, interested people can access numerous publications to assist in the transition process. A recent REAP Horizons article about the process of transition planning can be a useful tool to get you jump started in the process. Other helpful articles since 1996 on transition planning can be accessed through www.ext.vt.edu under Farm Business Management as well as the website http://www.reap.vt.edu under the headings of REAP, publications, Horizons.
In addition, VCE is producing a series of estate and retirement planning articles under the title "Managing Prosperity: Estate and Retirement Planning for All Ages." So far, a dozen articles in the series are available through your cooperative extension agent or on the web at www.ext.vt.edu under Farm Business Management or Financial Planning. More articles in this series on timely issues in transition planning are on the way.
The seminars sponsored by VDACS form part of the Virginia Ag Vitality Program. As a part of this program, the state has assembled the Farmland Preservation Taskforce to draft a model purchase of development rights ordinance for Virginia localities. This ordinance will seek to allow farmers to receive fair payment for their property rights while continuing to farm.
The Farm Link program provides the other key piece of the Ag Vitality program. VDACS and VCE will be making efforts to bring young farmers wishing to enter the business together with farmers preparing to retire with no heirs wishing to take over the farm operation. For example, VDACS website contains information on transition planning and possible opportunities linking the younger and older generation. That website is http://www.vdacs.state.va.us/index.html.
Finally, this winter VDACS will be surveying Virginia producers concerning transition planning. This survey, which takes less than 30 minutes to complete, will provide valuable data to the state and producers. This will be merged with national and international data to provide a broad range perspective to the challenge of transition planning facing agriculture throughout the world.
Studies by master's degree students working in the area of agribusiness and value added opportunities in agriculture are providing insight on many innovative and early adaptors exploring the opportunities in this area.
Teams of agents, specialists, and students are assisting producers, producer alliances, and cooperatives in evaluating alternatives to capitalize on entrepreneurial opportunities throughout Virginia. Businesses, organizations, and families with goals, interests, and challenges that are evolving over the lifecycle need assistance. A coordinated effort of research, educational programs, publications, facilitators, and counseling can assist Virginia agriculture and commodities to capitalize on the opportunities and challenges facing its citizens.
Present world industry conditions understandably cause feelings of trepidation and anxiety. However, many opportunities exist to better your business and the industry. The efforts described in this article proceed with the sincere hope that the combined expertise in the VDACS, VCE, and the leading agribusinesses can build a better Virginia agriculture.
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