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Family Business Matters 05/27 10:36
Create Your Present and Future Legacy
There are things you can create today that are powerful in terms of legacy
and your impact on others.
Lance Woodbury
DTN Farm Business Adviser
The word "legacy" is primarily used to describe something created in the
past that is intended for future generations. For example, land acquired or
inherited is often part of a farmer or rancher's legacy. The leadership roles
someone played in their community or industry can be a part of a legacy. Money
passed on to children and grandchildren might be part of a legacy. One's faith,
values or reputation are less material but just as important as the tangible
aspects of legacy.
There are also things you can create today that are equally powerful in
terms of legacy and your impact on others. Consider the following examples.
SMALL INVESTMENTS IN DIVERSE ASSETS
Most farm and ranch families reinvest their profits in land or other
agricultural assets. But many families also realize the importance of
diversity, such as the value of multiple types of crops and livestock, or
different geographic locations.
Putting a small amount of money into nonagricultural businesses -- such as
financial investments, including specific publicly traded stocks, or other
types of businesses, including startups or venture capital funds -- can grow
and compound over decades. I know one family that has even put a small
investment in cryptocurrency. You might not put large sums of money in these
vehicles (as you could lose the funds), but over decades, they might grow to
provide a sizable gift to your kids or grandkids.
PERMISSION TO MAKE NECESSARY CHANGES
A less-material gift is a verbal or written statement to your family today
giving them permission to make changes to the business or your assets in the
future. Many recipients can feel guilty about veering from the purpose or
intent of the original gift. But circumstances, economies and business
conditions change. Give your family permission to exchange some land or sell
some assets; let them bring future spouses or in-laws into business roles or
decisions; or allow them to change the ownership structure to fit their vision
and goals.
A METHOD FOR PARTNERS TO EXIT
One of the specific changes that may need to happen in the future is for
your heirs to end their business relationship. Many partnerships arise from
estate-planning practices, such as putting assets in an LLC, or from the desire
to treat heirs equally with illiquid assets such as land. However, differing
goals, behavioral expectations and personal circumstances may warrant an end to
a partnership. Make sure that you have "buy-sell agreements" in your legal
entities and that they are well-thought-out with your attorney and accountant.
A REASON TO GATHER AS A FAMILY
When several family members work in the business or when children are
growing up, the company serves as a focal point for communication. As time goes
on, the likelihood that all your heirs will return to the business is slim.
Consider giving your family a "nonbusiness" reason to gather. Several families
use donor-advised funds or a private foundation to give money to those less
fortunate, which also gives them a reason to spend time together. Other
families create a tradition around vacations, mission trips or sporting events.
The point is to find a reason to gather that isn't dependent on knowledge of,
or passion for, the business.
Your legacy isn't simply the sum of your life's investments and activities.
Your legacy includes the choices you make today, which influence the trajectory
of your family and business in the future. Diverse investments, permission to
change, good exit strategies and a purpose for family gatherings are a few of
the things you can create today that future generations will appreciate
tomorrow.
Lance Woodbury can be reached at lance.woodbury@pinionglobal.com
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