Wyoming attorney encourages ranch families to create business plans
Bob Berger, an attorney at Lonabaugh and Riggs, LLP, encourages ranch families to sit down and create a plan for business management and operation.
“We might call the process estate planning, transition planning, business planning or legacy planning. The key word is planning because it really does make a difference,” he says.
There are bound to be conflicting goals for how to keep the ranch operating and how to treat everyone fairly, but working through the planning process can help sort those conflicts out, he says.
Berger comments, “The ultimate objective is to have enough communication that we know what everybody wants and we can come up with a plan.”
Planning can easily be put off due to the priorities of other ranch work, uncertainties surrounding how a plan should be managed and the potential for changes in the future, but Berger encourages families to set aside time for the conversation.
“We’ll change if we’re lucky enough to continue operating and continue living for a longer period of time. We can tweak the plan as things change, but don’t let that uncertainty drop it all together,” he notes, discussing ownership and management decisions. “I think, we would probably rather decide ourselves than have someone else, like a judge in a courtroom, decide for us.”
There are many tools that can be used in the planning process, including a basic will.
“The concept of a will is pretty simple. We’re telling the world who is going to get our stuff. We’re making some decisions, and we are giving direction as to who is going to be in charge of the estate, who is going to talk care of the minor children and where things are going to go,” Berger explains.
He recommends designating both a power of attorney for healthcare and a power of attorney for business to avoid the probate process, save expenses and keep the information out of public domain.
“We can make personalized plans that are appropriate for the family,” he states.
Gifts are another tool that can be used in planning, allowing for small, incremental transfers from one generation to the next.
“We are working on that with many families, where we have essentially solved the tax problem for the first generation. We are working right now on moving it down from generation two to three, because there is a lot of wealth accumulated in the second generation,” adds Berger.
Creating a business entity, such as a partnership or limited liability corporation (LLC), is also useful in some cases, and operating agreements can also be created to outline the roles of everyone involved in ranch ownership and operation.
“Life insurance also often works into things. People are using life insurance policies to fund a buy-out of a family member who passes away, to provide cash for that person’s family and to bring the ranch stock back into the group that’s operating it,” he suggests.
Diversified operations provide additional opportunities as well, often providing family members with options for staying close to the ranch while building their own financial stability.
“Maybe the backhoe that’s used for cleaning ditches on the ranch is also used to build a well pad the next day. Eventually, families branch out and have separate businesses, which allows for better planning for multiple family members. It’s been remarkably effective with many families I have worked with,” remarks Berger.
He further comments, “Holding assets in joint tenancy is another good way to plan for a transition.”
Conservation easements and private foundations are additional tools that can be used in the planning process, especially for families that would like to use their property for charitable causes.
“What’s important is how we combine these tools. We can do lots of different things,” Berger states.
In one example, a family created multiple businesses relating to different ranch objectives, gifts annual shares to the children and ties everything together with flexible, long-term lease agreements.
“The family has given enormous thought to it. They have worked out something that is so thoughtful and so workable for their family,” he says.
Berger stresses the importance of planning and communication and recommends incorporating the advice of advisors such as an accountant, banker, investment advisor, attorney, appraisers and other relevant professionals.
“We can think of a lot of reasons to put it off, but planning now is going to make a difference for you and your family,” he says.
Natasha Wheeler is editor of the Wyoming Livestock Roundup and can be contacted at email@example.com.