Estate Planning

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

Legal issues, tax laws, and personal differences between family members are some of the issues families must confront when deciding how to transfer the managerial and asset control of a family business. OSU Extension has written a nice introductory factsheet on succession planning located at http://ohioline.osu.edu/bst-fact/pdf/3607.pdf

There are two sets of materials available on estate planning on the Ohio State University Extension web site. The first are the newly revised set of twelve (12) Basic Estate Planning Fact Sheets at either http://ohioline.osu.edu/ep-fact/index.html or http://ohioline.osu.edu/lines/comun.html

The second is a more detailed but less recently updated set of material (dated November 2003) called “Estate Planning Considerations for Ohio Families” at http://ohioline.osu.edu/estate/

Other estate planning resources are available as links to Barry Ward’s web page on the OSU Agricultural, Environmental and Developmental Economics Department web site at: http://aede.osu.edu/Programs/FarmManagement/MgtPublications.htm that has the following additional links attached: Estate Planning for Tomorrow (pdf), Estate Planning: Writing Wills in Maryland (pdf), Virginia Cooperative Extension – Estate Planning (html), Farm Transition Planning (HTML). Go to the last web site above to click on these web pages.

Life insurance can be used as an estate planning tool and can be used to avoid probate. Since a beneficiary is designated proceeds bypass probate. Life insurance owned by someone other than the deceased and with beneficiary designation other than the deceased or spouse can also be used to bypass Federal estate tax, which is important only for those very rich. Life insurance can also provide liquidity needed for estate settlement costs if it is the wish of the heirs not to liquidate other assets to pay for such costs. Trusts have been around for some time and are increasingly used by the less wealthy. The most common use of a trust is to provide cash flow and to support the surviving spouse (most often the widow) with the proceeds of assets passed directly to the next generation. Trusts come in many different forms and types. Some trusts are living, that is are set up during the trust makers life and not by a will. Living trusts may be funded during the trust makers life or by a will. Likewise, living trusts may be r...
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A common miss conception is that only those with lots of money should have an estate plan. Yes, farmers who would like a son or daughter to be able to continue farming the farm do need to do estate planning. Yes, those with assets over a million dollars need an estate plan. However, it is also important for the less wealthy to understand how they title their car, life insurance, retirement plan, bank accounts, etc., as such is also part of their estate plan. Those less wealthy also would like for the sentimental items to be passed onto those heirs who most value them. So that the common and elderly person can understand the basic concepts of estate planning, a series of fact sheets called "Basic Estate Planning Fact Sheet Series" has been developed. The fact sheet series is written for the common person in an easy to understand manner and is in large print. Questions are provided at the end of each fact sheets along with answers. The authors of this fact sheet series are me (Jim Skeeles) and Russell Cunningham, an ...
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(click here to view PDF version)

Planning is one of the most important aspects of managing any business. This is especially true for farms and agribusinesses due to their complexity and to the inherent uncertainty (i.e. weather, commodity prices) associated with agriculture. Farm families are encouraged to adopt a whole farm planning approach as they develop strategies for the future success of their business. This approach allows families to examine the internal structure of their business and then develop business, retirement, transition, estate, and investment plans. Click here to read the full article on farm business planning:

Abstract:  This paper offers an overview of U.S. farm real estate markets.  Major uses of land, location of farm real estate, and ownership patterns are summarized.  Characteristics of participants in farm real markets are reviewed.  Farm real estate values and rents examined, and factors affecting farm real estate values are reviewed, including the effects of conversion of farm real estate to other uses.  Finally, historic returns to farmland owners are summarized.

Website for the full article:

http://aede.osu.edu/resources/docs/pdf/VLD5TV2A-AFSH-OONX-SM8D0QN04YGKJRS8.pdf

During an estate planning workshop conducted in February, 2005, OSU Extension personnel surveyed twenty-eight participants to identify estate planning priorities. Participants in the estate planning workshop were asked to select their estate planning priorities from a list of twenty-seven objectives. Below are the results: Top Ten Estate Planning Priorities for Farm Families (ranked according to participants’ order of importance): 1. Minimize estate taxes on estates of both spouses. 2. Minimize probate estate. 3. Provide security for surviving spouse. 4. Provide security for both spouses after retirement 5. Nominate agent in a durable power of attorney in case of disability 6. Assure continuity of farm or business 7. Minimize estate taxes on estate of first deceased spouse 8. Provide means of paying expenses of estate settlement, taxes and other debts 9. Take full advantage of the marital deduction 10. Keep business in the immediate family These findings emphasize the importance that farm families place on minimizing taxes and probate. Not surprisingly, providing security for surviving spouse or both spouses after retirement ranked high. Cl...
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The third lesson of the OSU Extension Estate Planning Letter Study Course, which can be viewed at http://lorain.osu.edu/ag/Lesson32.pdf compares the pros and cons, including cost of transferring appreciated property by sale, inheritance and giving. The lesson also discusses the pros and cons of different property ownership, such as fee simple, life estate, tenancy in common, joint tenancy with right of survivorship (JTRS) and tenancy by the entirety. Pros and cons of owning personal property such as bank accounts by JTRS is also discussed. If you would like all 12 lessons, visit http://lorain.osu.edu/ag/pg1.htm for enrollment and other information on the letter study.

A 12 lesson letter study course is available on estate planning. Take a look at the second lesson at http://lorain.osu.edu/ag/Lesson22.pdf which addresses the cost of settling an estate. The lesson ends with the following table that suggests possible savings for a couple with the simplest planning.

If you would like all 12 lessons, visit http://lorain.osu.edu/ag/pg1.htm for enrollment and other information on the letter study.

A 12 lesson letter study course is available on estate planning. Take a look at the first lesson at http://lorain.osu.edu/ag/Lesson13.pdfwhich which addresses the following topics: Do’s and don’t with life insurance; Retirement funding vs. preserving assets; Treating children equally or equitably; Continuing a business in an efficient/functioning/profitable manner while transferring management; and Planning the disposition of your assets while providing liquidity for and minimizing estate transfer costs. If you would like all 12 lessons, visit http://lorain.osu.edu/ag/pg1.htm for enrollment and other information on the letter study.

Producers are now focused on harvesting activities as the calendar changes from September to October. But as the third quarter of the year ends, managers should also begin thinking about the financial and tax decisions that will need to be made by December 31, 2004 . To begin financial planning for the year's end it is essential the 2004 farm records are up to date. The end of September is an excellent time to do a nine month summary of receipts and expenses and make comparisons to a 2004 budget or to similar numbers for 2003 and 2002. While a lot can happen in the final three months of the year the manager needs to begin estimating income and expenses for the remainder of the year utilizing a 2004 budget or income and expenses from 2002 and 2003 for October, November and December. Of course any numbers used from a budget or previous years will need to be adjusted for prices and quantities to reflect current business conditions. For tax planning purposes, it is also important to get an ...
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We try to make money and build assets, invest instead of spend and build the farm business during our lifetime. But then when we think we have it made, the debt load is no longer burdensome, the kids are raised, and maybe even some have stayed on the farm and joined the business, we have to worry about how to transfer the farm business while treating equitably those kids who didn't stay on the farm. Further, most don't like to think about death, let alone plan for after death. So, estate planning isn't easy, but for farmers is a necessity. Two things make an estate plan more important for farmers than for others: Farmers live poor but die rich, usually land rich. The more assets you have the more important an estate plan, so that the farm won't have to be liquidated to pay estate settlement costs. The government has a plan for you if you choose not to do estate planning. It used to be that the government's plan minimized estate settlement costs. However, that has changed. Now th...
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