Handing over the family business

DON ANSLOW
Handing over the
family business
Austin Van Meter is only 13 years old, but his father, Ron,
already has a succession plan in place to ensure a smooth
transition of the family business, even if Austin opts for a
different career.
Plan ahead To Transfer WealTh and haPPiness
By Don Anslow
ith the passage of a $7.5 million exemption from
the state’s 9 percent estate taxes on agricultural
property this Legislative Session, Oregon nursery
owners were recently given a strong incentive to
keep the “family” in family-owned businesses. The exemption
applies only if the property is passed to a family member and
remains in agricultural production for five of the next eight years.
Jeff Stone, the OAN’s director of government relations, explains
the importance of pursuing this legislation. “The enthusiastic support
we received from Republicans and Democrats alike speaks
to the importance legislators placed on passing on the nursery or
farm from one generation to the next. Estate tax reform was a priority
for the nursery industry, and I am pleased that the association
was able to deliver a significant victory to our members.”
Now, more than ever, succession of nursery ownership to the
family remains an attractive option, but it is not without its pitfalls.
Like any business transaction, the transfer of assets (or operations)
between generations is best handled with a plan and a strategy.
The owner contemplating retiring after an orderly transfer of the
business to his family with tax protection under this new law must,
at the very least, prepare his family for a minimum of five years of
operations. An owner choosing to gift his assets to his family faces
a lengthy process constrained by federal limitations, and an owner
choosing to “take the money and run” faces huge tax burdens
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DON ANSLOW

KEVIN CURRY
BUSINESS SUCCESSION
Ron Van Meter’s college education was
interrupted to take over the business his
father started, and he wants to give his son
a chance to pursue his dreams beyond the
nursery before deciding whether he will
accept the responsibility.
and uncertain real estate selling cycles
— not to mention the emotional and
financial impact upon his successors.
The formulation of a successful
plan — sooner, not later — is vital to
preserving family assets. But as Ron Van
Meter of Van Meter & Son Nursery in
Boring, Ore., discovered, family assets
include far more than financial capital.
Ron is an active participant in an ongoing
succession plan. The emotional
health and happiness of all parties are
a vital consideration in such plans. He
should know; he has seen succession
from both sides.
Ron’s father, Morris, started the
nursery over 35 years ago in the family’s
backyard. It grew over the years
to become a 550-acre, highly efficient
business — very different from its
humble beginnings. In 2004, Morris
and his son started to discuss how
Morris would retire, and then in 2005
he did. One year was insufficient time
to execute the transfer of the business
without unnecessary hardships, not the
least of which was giving up school.
Ron explains: “One of my biggest
regrets is only being able to complete
two years of college because I came
38 SEPTEMBER 2007 ▲ DIGGER
back to work in the family business
and could never go back. I would have
been a better partner to my father and
our associates if a process had been
in place for the transition between my
father and myself.”
With insight gained from that trying
experience, Ron sums up the bottom
line for a good plan. “One goal is that
you maintain your friendship during
the process,” he says. Clearly, Ron
understands that succession is a twoway
street. “It is my responsibility to
see that [the next] succession is done
in such a manner that the long-term
ramifications are beneficial to the one
transferring and the one receiving,” he
adds.
During a recent tour of Van Meter
Nursery, a visitor mused that while
Ron’s 13-year-old son, Austin, worked
hard at trimming an endless line of
grafted conifers, the foresight of Ron’s
plan was striking. Yet Ron has already
implemented a succession plan with
the assistance of Doug Sippel, president
of Titan Financial Associates.
True wealth planning
Sippel approaches the process by
first helping clients and their families
understand the value of their assets.
Sippel notes that when asked to define
their assets, most people’s answers
usually include the expected: Business,
real estate, stocks, cash, etc. But when
he poses a simple question: “What is
your most important asset?” the answers
are far different.
“If you have never asked yourself
this question, you should,” he says.
Sippel reports that people’s answers
usually come down to: “my health,
my family and my integrity.” He points
out that there are four types of capital
which make up what he coins “True
Wealth”:
• Financial Capital — Monetary
assets with a dollar value.
• Human Capital — Includes values
and virtues that prepare heirs to
manage business with character, ethics,
morality and integrity.
• Intellectual Capital —
Knowledge, training and experience.
• Social Capital — Things you
cannot keep: charitable gifts or taxes.
Sippel’s True Wealth concept does
not overlook the obvious financial
requirements addressed in traditional

estate planning, but additionally provides
“tools” for the optimum transfer
of wealth, particularly the other three
less tangible capitals. The most significant
tool is the drafting of a Family
Financial Philosophy. This document
defines financial independence and
your family’s capital legacy according
to your expressed values; it governs
the planning and implementation processes
and provides a road map for
your successors like no other document
— including a will — can. Other
tools include:
• Developing a family communications
system.
• Teaching young heirs the values
and responsibilities associated with
financial wealth, and creating mentorlike
relationships in trusts or LLCs.
• Transferring authority and responsibility
to young heirs as appropriate.
Family involvement:
communicate your wishes
Sometimes, without meaning to,
parents can allow the succession planning
process to become something
they do to their children rather than
with them.
“When appropriate,” Sippel explains,
“the children — even the grandchildren
— should be included in the process.
Think of your job as a manager rather
than an owner. Good managers do
not consider the assets as their own,
but (know they are) charged with the
responsibility to be good stewards of
the assets under their control. Part of
that job is building a good warehouse
to hold those assets. This warehouse is
the people who will be given the job of
managing the assets after you turn the
job over to them. So focus on preparing
your heirs with the character, integ-
BUSINESS SUCCESSION
rity, self-confidence and ethics to be
excellent stewards in their own right.”
In the case of business exit planning,
where time constraints for tax,
training and other considerations are
paramount to the success of the business
under the young successor’s leadership,
Sippel points out that all too
often time runs out — or at least runs
too short. “There are cases when the
parent waits too long to communicate
their real desires, and children get sent
the message that mom or dad is going
to be in charge until they die. Even if
this is not the intent, it is communicated
through actions.”
In his experience Sippel has
observed that such miscommunication
can lead to successors (or key employees)
being ill-prepared to assume
effective leadership of a family busi-
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40 SEPTEMBER 2007 ▲ DIGGER
BUSINESS SUCCESSION
ness. Other common issues are the
unneeded diversion of a young person
from a different — and possibly more
appropriate — career because they feel
unsupported in pursuing it. Or, as with
Ron and his father, a young person can
be interrupted in the middle of an education.
In any case, poor communication,
the lack of a plan and the absence
of a philosophy make continuity of
good stewardship a needless struggle.
At Van Meter & Son Nursery, Ron
operates his business with a keen sense
of such stewardship and with the values
and discipline to achieve success on a
variety of levels. Business, including
monitoring of succession parameters,
is governed through a strategic plan
with 1-, 5- and 10-year goals, which are
monitored monthly.
On a bright summer morning, a
recent visitor noted not only young
Austin Van Meter’s diligent labors, but
also the well-used motocross motorcycle
standing proudly in the back of
his father’s truck — Austin’s cycle as it
turns out. Clearly the young Van Meter
has interests beyond plants. In fact, he
is an avid, and rapidly advancing, junior
motocross rider. Could his life’s passions
stray from receiving a business that his
father so carefully tends? It may not
look that way on a day when father and
son are engaged in a thriving business
that brings them together in a healthy
enterprise that serves them both well on
ledgers of financial and human capital.

However, Ron Van Meter acknowledges
that it is a distinct possibility.
The presence of such a plan gives
Ron the confidence to face the future
with his son’s happiness as the prime
goal. “If I really love him, I must give
him a chance to gain independence
and a sense of self-worth separate
from me or this business.” But whether
Austin settles on a path to — or away
from — the nursery, the Van Meter
succession plan is designed to remain
flexible enough to accommodate such
eventualities without threatening his
son’s aspirations or Ron’s retirement.
Ron explains the rationale underpinning
a sound plan. “If your objective
is only to transfer money, then it
becomes very selfish,” he says.
Drawing on the values of the True
Wealth philosophy, he concludes, “It
is my responsibility as a parent to gain
BUSINESS SUCCESSION
the experience and plan for all facets of
the business transition. I want my son
to be able to stay true to his dreams
… and know that he is supported and
loved in any decision that creates a
healthy life for him.”
Ultimately, no enterprise’s future
is a sure thing. But with the help of
Oregon’s more generous estate tax
laws, an understanding of Sippel’s succession
planning principles, and with
a commitment — like that of Ron Van
Meter — to an heir’s happiness, the
future for Oregon’s family owned nurseries
looks bright.
Don Anslow is a Portland area freelance
writer. He can be reached at
(503) 819-4460. Doug Sippel of Titan
Financial Associates contributed heavily
to this story. He can be reached at (503)
629-0810 or dsippel@titanfa.com.
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