All Posts Tagged: Jeff Hoffmann

In this regular series we feature an advisor from Bank of the West’s Wealth Management Group sharing a useful reply to a question that many of our clients have. Today Doug Constant answers this question:

This is a common challenge for many agricultural businesses. Bank of the West has worked with many clients facing this issue, and one of the main questions they ask is whether keeping their assets consolidated is a good choice for them. Here are some points about consolidation to keep in mind when planning your business’s future:

• If your aim is maintaining a credit-worthy operation during and after the transition, it makes sense to keep the assets (land, equipment and revenue generated by them) consolidated into an entity that leaves the borrowing authority and decision-making ability in the hands of the farm’s operators. For the smoothest transition, those “operators” could be a combination of existing management (e.g., the father and/or mother) and their heirs operating as a Board of Directors (for a corporation) or as managers (for an LLC).
• When gifting to future generations or leaving a farming operation to the heirs upon death, remember that the only thing passed on is the shares/membership interest of the farming entity. The entity’s existing management decisions and revenue to support borrowing needs remain intact.
• Consolidating offers potential tax advantages, such as receiving a step-up in basis of the assets upon death; an estate tax deduction when farmland isn’t the “highest and best use” for the property (e.g., urban influence); and the ability to defer payment of estate taxes over an extended period. (NOTE: A tax professional should be consulted regarding your entity’s specific circumstances for all three items above.)

At Bank of the West, we know there are no “one size fits all” solutions for succession planning in Ag or any other industry. Gifting assets to future generations while maintaining management control and credit worthiness can be an attractive option for farm operators looking to establish a secure path for future generations.

To learn more about Bank of the West’s Wealth Management Group or to find a private client advisor, click here.

As Market Leader and VP for Agribusiness Wealth Management at Bank of the West in Fresno, CA, Doug Constant and his team are dedicated to serving the bank’s agricultural families around the country. Since Doug has been involved with ag-related businesses all of his career, he has a unique perspective on the challenges that farming families face.