For many farm and ranch families, bringing children or grandchildren into the operation is the ultimate goal.
This may require some creativity, as all parties need to maintain a viable standard of living. This article will highlight ideas and tactics for bringing another family member into the operation.
One tactic is to provide new family members with monetary compensation, such as an hourly wage or salary. The total compensation should be comparable to the market value of wages to hire a non-family member to do the same work.
Here are things to consider when employing this strategy.
Start any time
This strategy can begin early in life. Children under 18 can earn monetary compensation from the farm or ranch. This can give family members a sense of responsibility and allow them to learn how to manage money at an early age.
Furthermore, this can jump-start their savings for education, retirement or business assets.
For the youngest generation, work with a financial advisor to explore tax-advantaged ways to save and invest on a child’s behalf such as Roth IRAs or 529 Accounts.
Wages or salaries paid to family members may be tax deductible. The downside is that it may require additional paperwork. Work with your accountant to make sure you have the correct documentation and reporting.
Financial freedom
A competitive compensation package shows that you value contributions to the business, and being able to make their own spending and investment decisions can be empowering for family members.
Setting expectations
One of the biggest challenges for farm and ranch families is setting expectations for work. Different generations often have different views on this matter.
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