Transcript Farm Transition & Estate Planning: Helping Ohio Families Face the Future Chris Bruynis, PhD Assistant Professor & Extension Educator David L.

Farm Transition & Estate Planning:
Helping Ohio Families Face the Future
Chris Bruynis, PhD
Assistant Professor & Extension Educator
David L. Marrison
Associate Professor & Extension Educator
CONNECTING THE OHIO STATE UNIVERSITY TO OHIOANS
Problem Statement
• Average Ohio farmer
– 57 years old
– Majority has not named a farm business
successor
– No current farm business transition plan
• Research shows
– >1/3 of all family businesses successfully
transition from first generation to second
generation
– >1/3 of those eventually transition to the third
generation
Teaching Objectives
• Increasing knowledge
– Current planning tools
– Current tax laws
• Encourage family communication
• Encourage starting and completing
many pieces of their transition plan
Multiple Styles & Models
• Presentation format varies from
– Lecture with suggested readings
– Activity based format with case studies and
suggested document organization
• Delivery ranges from
– Multiple day workshops
– Full day workshops
– Presentations within a larger workshop
– Evening programs (2-3 hrs)
Teaching Approach
• No one correct plan
• Multiple tools available
– Each has its own pros and cons
• Personal planning objectives will
determine which tools
• Communication is critical to success
• Don’t forget the untitled assets and
goodwill agreements
Whole Farm Planning Model
Answer this Question
Do I want to pass my
family business on to my
heirs as an ongoing
business or do I want to
pass it on as a group of
assets?
Transition Planning
• Assumes a next generation
• Involves
– Growing the business to accommodate
more families
– Selecting and training a successor
– Gradually turning over control of the
business
– Creating an estate plan that protects the
on-farm heir(s)
Estate Planning
• The transfer of assets (the estate) from
one generation to the next
– Ownership of assets (sole proprietor verses
limited liability company or s-corporation)
– Treatment of heirs
– Step-up in basis issues with different plans
– Probate concerns
– Trusts, TOD’s, Power of Attorney, Wills, etc
Retirement Planning
• Planning cash flow needs in retirement
– Identifying the retirement dream (and how
much it might cost!)
– Estimating future cost of living
• Rule of 72 & rule of 115
– Potential cash income from owned assets
• Both on farm and off farm holdings
– Long term care planning and cash needs
Importance of Planning
• Business Entity Documents are the glue that
keeps a business plan together
– Partnership agreements
– Corporation bylaws
– LLC operating agreements
• These documents control
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Who are the owners
Ownership percentages
Management authority
Transfer restrictions
Dissolution terms
Meeting Evaluations
• Evaluation data showed
– Increased knowledge on estate tax laws
– Improved communication and expectations
between generation
– Sense of urgency to start working on a
transition plan to reduce risk exposure
– Sought out professionals to help create the
transition/estate plan.
Transferring Your Farm Business
to the Next Generation Bulletin
• OSU Extension Bulletin 862 available at
– http://estore.osu-extension.org
• 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?
Transition Planning Factsheets
• Available at http://ohioline.osu.edu/bstfact/index.html
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A Comparison of Business Entities Available to Ohio Farmers
Conducting a SWOT Analysis of Your Agricultural Business
Conducting Successful Family Business Transition Meetings
Develop a Useful Mission Statement for Your Agricultural Business
Developing Goals for the Agricultural Business
Developing the Next Generation of Managers
Planning for the Successful Transition of Your Agricultural Business
Starting, Organizing, and Managing an LLC for a Farm Business
Tax Characteristics of Business Entities Available to Ohio Farmers
Using Liability Limiting Entities to Manage Liability Exposure for
Ohio Farms
– Is a Prenuptial Agreement Right for Your Farm Business?
– Whole Farm Planning Model
Basic Estate Planning Factsheets
• Available at http://ohioline.osu.edu/ep-fact/
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Introduction to Estate Planning
Costs Involved in Transferring Property
Tax Basis if Property Is Transferred
Why Have a Will?
Letter of Instruction
Life Insurance
Trusts
Giving
Sale of Residence
The Nursing Home Dilemma
Medicare and Medigap
Miscellaneous Issues
For More Information
Chris Bruynis, PhD
Assistant Professor & Extension Educator
OSU Extension, Ross County, Ohio Valley EERA
[email protected]
740-702-3200
or
David Marrison
Associate Professor & Extension Educator
OSU Extension, Ashtabula County, Western Reserve EERA
[email protected]
440-576-9008