Time for a Change on the Family Farm

Oklahoma State University National Extension Risk Management Conference

March 26-27, 2003

J.C. Hobbs, Area Extension Agricultural Economics Specialist

Lori Shipman, Extension Associate

History

Organized advisory council.– Objectives– Scope

Held in-service for extension educators.– Sequence

Presentations for the public.– Solid set of materials developed

Developing a website with video streaming.

Objectives

To provide a comprehensive set of materials and information to present to farm families contemplating retiring from, leaving, or transferring family farm operations.

To provide adequate follow-up through programs and individual visits to see families develop actual farm plans

Time for a ChangeProgram Topics

Goals Estate Planning Financial Inventory Retirement Income Shifting Ownership

and Asset Transfer

Shifting Control and Compensation

Investing Off-Farm Insurance Advisory Team Communications

Goals

Begin with the end in mind to determine the journey.

Write down goals that are S.M.A.R.T.– Specific, Measurable, Action-oriented, Reasonable,

Timetable

Stress the importance of adult family member inclusion in the goal development process.

Provide a start that will reduce expenses in the long run.

Estate Planning Issues

Minimize estate settlement costs to ensure that the business remains viable.

Transfer farm business and other assets to those that we want to have them and make sure the transfers maximize the estate tax benefits.

Provide a general overview of estate planning tools and transfer issues plus explain the estate tax laws.

Financial Inventory

Determine the financial state of the business now – Asset inventory– Liability list

Create financial statements for understanding and financial management planning.– Intensive Financial Management and Planning

Support (IFMAPS)– Integrated Farm Financial Statements (IFFS) software

Proactive planning for retirement or adding a second generation.

Retirement Income

Determine common sources for income at retirement.– Social Security– Pensions and retirement plans– Investments– Sale or lease real estate and assets

Determine a retirement lifestyle.– Travel– Volunteer work– Farm work

Shifting Ownership & Asset Transfer Alternatives

Evaluate ownership transfer alternatives and the income tax implications for the following options for transferring assets.– Outright sale of the business assets– Installment sales contracts– Gifting of assets– Combinations of these alternatives

Discuss pros and cons of business organization types.– Partnerships, LLCs, corporations

Shifting Control &Compensation

Transfer ownership/management of the business from the existing to new generation.

Determine an equitable share of the income for each party.

Discuss the transfer stages.– Testing - Commitment - Establishment - Withdrawal

Investing Off-Farm

Understand the need to invest in other assets than land.

Understand the risks, costs, and growth of investing.– Investment pyramid– Read, read, read

Teach “save early, save often and invest wisely”.

Insurance

Discuss the alternatives available for insurance.

– Health HMO, PPO, POS, High Risk Pool, Group or Individual Coverage Medicare and Medicaid

– Long-term care Types Tax advantages Coverage Nursing home costs and government look-back period

Advisory Team

Develop a team of “experts” to help develop a solid plan.– Accountant, tax preparer, CPA– Attorney– Financial planner

Prepare to interview the advisors for selection.– Experience, references– Continuing education

Determine needs.– Payment terms– Availability– Team effort– If it isn’t working – Change advisors

Communications

Schedule appropriate meeting times in neutral settings to discuss farm business.– Include the appropriate adult family members

Develop an understanding of family member personalities and communication styles.– Personality I.Q. (True Colors)

Program Delivery

Determine the appropriate delivery.– 2-4 Evening or day sessions

Consecutive One or two nights/days per week during the month

Select speakers for sessions.– State Specialists– Area Specialists– County Educators– Private insurance agents

prepared to deliver education not sales

Cost of Program

Notebook of materials and workshop– $35 per couple– $50 per family unit with one set of materials

Light lunch or dinner provided– Cost reimbursed to county

Impact

Five workshops held, 1 planned 37 families (approximately 73 people) High marks for delivery and topics Participants mark that they intend or strongly intend

to use the knowledge they have gained in their plan One former participant stated, after the death of a

spouse: “The transition was traumatic, but it was much smoother than it could have been, because they had attended the Time for a Change program.”

Follow-up

Met with families individually.– Estate planning– Financial planning– Ownership alternatives

Presented requested programs.– Quicken for Farm Financial Records workshops

www.agecon.okstate.edu/quicken

– Estate planning– Property ownership

New Approach

Website and CD– Video streamed presentations– Links to fact sheets and other valuable information

www.agecon.okstate.edu/TFAC

Questions??

For more information contact:

Lori Shipman 405-744-9836Lship@okstate.edu

J.C. Hobbs 580-237-7677Hobbsj@okstate.edu

Damona Doye405-744-9836Ddoye@okstate.edu