Yikes, what happened? Only a month ago, I thought things were looking up. My corn basis was set. My diesel fuel was bought “right.” The winter was relatively mild and the snow is all melted. It looks like we have a good chance to start planting early or at least “on time.”
Everything looked so much better than a year ago and then this coronavirus thing happens. At first everything that sounded like an exaggeration of what could happen is suddenly happening. Some people may be wondering if this just going to be another bump in the road or if it is the end of the road?
New challenges bring up both realities and opportunities. Here are some realities:
Things can change in a hurry. Every estate plan needs to have key components and guidelines clearly spelled out. Leave as little room for interpretation, guesswork and negotiation as possible.
Every plan has to cash flow. Day after day, I see plans that won’t cash flow for the next generation. Appointments are non-stop but one of the biggest concerns in meetings the last month is if the plan will cash flow. Cash flow should always be the concern, not just now. If finances are tight for you now, how will the next generation make it if they have your debt plus the new debt associated with buying out siblings?
Every farm has risk. Real and scary risks that can mentally, physically and emotionally hurt a person or a family. Often times these risks are out of our control. Farming risks is hard to explain to others who don’t have a farm checkbook that they live off of. Does your estate plan have an adjustment for those who will be taking on that risk in the next generation?
Tight finances bring on tension between spouses, children and business partners. Talk about it, plan for it and deal with it.
What are the opportunities?
Maybe this will give you time to reflect and think about things you don’t always have time to think about. Dig out your current estate plan and read it. Does everything make sense? Have you informed the people who need to know? Do the ideas in your head, your legal documents, your financial products and asset ownership all match up?
Maybe your plan needs to adjust buyout formula’s (more on that in my next column) that determine value. Maybe some loans or financial products need to be restructured. Be positioned to move quickly.
Families are important. In times like these, the value of families should shine. People need to put their hand in the center of the huddle and say “go team.” Your family and your farm are worth fighting for. Stick together.
The stock market just got whooped and maybe your farm is breaking even or losing money. If you have an IRA this may a great time to think about converting to Roth IRA. If your IRA was $100,000 and now it is down to $70,000 plus you are in a low tax bracket, consider paying the tax now and then as the market recovers, it is growing tax free. Conversions do not require moving it all nor do they require a new sales charge.
State and federal governments are unleashing massive programs to keep the economy moving. Farming without the government is better but understand if any of those programs fit your situation.
Accept the challenges. Face the realities. Capture the opportunities. I believe in the future of agriculture.
Myron Friesen is the co-owner of Farm Financial Strategies Inc. in Osage, Iowa. He can be contacted at 866-524-3636 or email@example.com.