Estate Planning

I received an email from the University of Minnesota’s  Center for Farm Financial Management which has developed a web site called AgTransitions.  This web site provides a means for farm and ranch families to develop a written transition plan on the web. I encourage you to check it out! 

AgTransitions is located at https://www.agtransitions.umn.edu

AgTransitions provides users with a built in “curriculum” in the form of an outline for sections that might be included in a plan, tips for each section, web resources, and worksheets. Most importantly, it allows family members to communicate with each other and outside reviewers as they develop their plan. AgTransitions is not intended to replace farm succession planning workshops. Rather, it provides a means for producers to put what they have learned into action while allowing professionals to follow-up on their progress.  A great introductory video is included on the home page.

As the age of farm operators increases, transferring the ownership and management of the family business to the next generation will become one of the most important issues farm families will face. While many farmers dream of seeing their legacy passed onto the next generation, many postpone initiating a plan for the transition of their business for a variety of reasons. Many claim  there is not enough “time” to discuss these matters. Or if planning does occur, it simply involves the senior generation drafting a will describing how the farm assets should be divided among heirs.

To help farm families plan for the future, OSU Extension will be hosting a Transferring Your Family Business to the Next Generation workshops across Ohio in March.  These workshops will help answer the questions that often arise when planning for the future: Who will manage the business in the future? How much money will I need to make it through retirement? How do I treat each offspring fairly when it comes to dividing up our farm? How will I know if my kids are ready to take over the farm? What are the legal hoops that need to be jumped through to pass the farm on without hurting the financial standing of the farm? How can we plan so the farm will be profitable for multiple generations? Is there enough equity in the farm that I can retire without selling out?  These workshops will help you develop a plan for the future, discover ways to increase family communication, make pla...
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This blog was just posted early this morning by Peggy Kirk Hall (attorney and director of the OSU Agricultural & Resource Law Program) on her OSU AG Law blog located at: http://ohioaglaw.wordpress.com/

Here is her blog:

Since 2000, Ohio law has allowed property owners to avoid the probate process with a transfer on death deed, a deed that automatically transfers real property to a designated beneficiary upon the death of the property owner.   Under a new Ohio law, such transfers now require the preparation of an affidavit rather than a transfer on death deed.  The new law also allows those who hold “survivorship rights” in property to transfer their rights upon death, which the previous law prohibited. 

The changes occurred in S.B. 124, which became effective upon the governor’s signature on December 28, 2009.  The Ohio State Bar Association’s Real Property Law Section proposed the changes to simplify the transfer on death process and remove confusion over the rights of those holding survivorship deeds. 

See the bill and its changes to Ohio Revised Code Chapter 5302  here.     The Legislative Service Commission’s analysis of S.B. 124 is available here.   Visit this website for a good summary of the law.

I just posted the January edition of the Ohio Ag Manager newsletter at: http://ohioagmanager.osu.edu  This month’s newsletter features this Blog (and our OSU Extension Ag Law Blog) as well as our article on the 2010 Federal Estate Tax is in Limbo which was posted here first earlier this week.  Producers should also check out the tax management articles as they do have an impact as families make their succession and retirement plans.  I highly recommend you read Dr. George Patrick’s article from Purdue University at: http://www.agecon.purdue.edu/extension/pubs/taxplan2009.pdf

 It is 2010, and there is officially no Federal Estate Tax.  Why and for how long?  While the House recently passed a bill to reinstate the federal estate tax in 2010, U.S. Senators failed to reach a deal to temporarily extend the estate tax into 2010.  The extension proposed by the House would have kept the 2009 estate tax levels in place.  If the bill passed in the House becomes law, the first $3.5 million of an estate will be exempt from federal estate tax and the estate tax rate on the taxable portion of an estate would be 45%.  Senate Republicans want a permanent extension to a $5 million exemption and an estate tax rate of 35%.  If no compromise can be reached, we may continue with existing law.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the federal estate tax exemption increased during the past decade from $1 million to its 2009 level of $3.5 million and the maximum rate decreased from 55 percent to 45 percent.   In 2010, there is a full repeal of the federal estate tax.  Starting in 2011, the federal exemption is scheduled to revert back to $1 million.

The lack of movement by Congress could cause a huge TAX headache for many of Ohio farm families if someone dies before a compromise can be reached.  This is mainly due to the fact there will be only a limited step-up in basis. Under current federal estate tax laws (prior to 2010), the assets of the deceased get a step-up (or step-down) in basis to the fair market val...
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OSU Extension is pleased to announce the newly revised Bulletin 862 titled, Transferring Your Farm Business to the Next Generation is now available as a resource for families to use as they plan for the future. This 89 page bulletin helps families plan for he future of their business by examining the following questions:

1) Do I want to pass my farm operation to my heirs as an ongoing business or do I want to pass it on as a group of assets?

2) How can you tell if the business is profitable enough to provide for the next generation?

3) Are there enough income and assets to provide for the older generation’s wants and needs?

4) How can you help the two generations get along?

5)What should you transfer and in what order?

6) How can you avoid paying too much income, gift and estate taxes?

This bulletin is one which each generation should read. This bulletin can be purchased at your local county Extension office for $9.25 or can be accessed for free at: http://ohioline.osu.edu/lines/bulls.html

We stumbled across a really nice summary article titled Planning For Farm Business Transition/Succession written by Rodney Jones, Professor and Extension Specialist, from Kansas State University.  This 19 page article was presented at the 2005 Agricultural Lenders Conference.  Topics included in this article are:  Assessing the Current Business Situation, Strategically Considering the Future, Vision & Mission Statements, Objective & Goals, Family Communication, Developing a Transition Plan, Business Structures, and Stages of Successions.  You can access this article was presented at  written byhttp://www.agmanager.info/farmmgt/planning/default.asp