We’re finally getting into the nuts and bolts of succession planning. One of the first concrete steps you need to take is to get a handle on what you own and what it’s worth. This inventory includes all of your possessions, not just your land. Successful strategies depend on knowing what your assets are and how they are allocated, as well as your debt burdens and liabilities. Much of this documentation will come from your income tax statements and your will/living trust if you have one and have been keeping it up to date.
Please remember this is a snapshot in time of today’s asset list. As you proceed through your plans, you will have to occasionally update this.
Ties to the Land has a suggested list which serves well as a starting point for organizing this information.
We start with the real property: land parcels, buildings and other land-based assets. List all of your parcels on one list, and all of your buildings on another list, including houses, sheds, barns, etc. For each item, record: Description and location/address, Parcel number, Zoning, Easements, Date acquired and method of acquisition (purchase, inherit, gift…), % Ownership, Basis (value when you acquired it, usually the purchase price), Debt obligation
Timber – list your timber stands. Reference your management plan, if you have one for this information. For each stand, include: Description, Estimated value, Valuation date
This would be a good place to list an NTMP or WFMP if you have one. These permits travel with the land and are part of the land assets that allow the family business to operate.
You may be doing more than timber on your land. I would also list any farming/grazing leases you have.
I also think it would be useful to record average income from and expenses for managing these parcels.
Our next category is accounts in financial institutions, including banks, mutual funds, stock portfolios, life insurance and retirement accounts. There are small variations on what needs to be listed, but basically, you need to list the institution’s name, account number, account type (savings, checking, money market, CD…) and balance.
Bank Accounts: These are pretty basic, list: Bank or Institution, Account type, Account number and Balance
Mutual Funds: in addition to the identifying information, these accounts have portfolio information that will relate to capital gains calculations, including: Shares, Date Acquired, Purchase Price and Current Value.
Life Insurance: along with the identifying information, include the Owner of the policy and the Beneficiaries.
For Retirement Accounts such as IRA’s and 401(k) accounts, you should list the identifying information, the Plan Owner and the Beneficiaries at the time of the owner’s death.
The next major category is vehicles and large equipment. The first category is the on-road vehicles, your cars, trucks, RV’s and so forth. The next category includes your tractors, tractor attachments, lumber mills, chainsaws, mowers and other large equipment you use to do the work on your land.
Motor and Recreational Vehicles: List the year/make/model, title holder, purchase cost and date, estimated fair market value, debt obligation, appraised value, valuation date.
Machinery and Equipment: List the year/make/model, purchase cost and date, estimated fair market value, debt obligation, appraised value, valuation date.
Household possessions and general tools: Here is where you try to estimate the value of your furniture, kitchen tools, general purpose tools (most ranches have a lot of value sunk into this) and the rest of your everyday possessions.
Jewelry/Gems/Precious Metals: This category should also include antiques, collectibles and art if you have any. If you have the records, list and describe each item, its purchase date and cost, and its estimated fair market value.
Fair market valuation is going to be difficult for a lot of what we own. How do you value a twenty-year old tractor, the furniture you inherited from your grandmother or that outbuilding you built yourself from scratch? The important part right now is to get it on the list. You can always adjust the valuation as you get more information.
Later, when we begin assembling the family business structure, we will add these assets in and use them to assign values and shares of the business to our heirs and successors.