Time for a Change on the Family Farm

1. Time for a Change on the Family Farm Oklahoma State University J.C. Hobbs, Area Extension Agricultural Economics Specialist Lori Shipman, Extension Associate National Extension Risk Management Conference March 26-27, 2003

2. 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.

3. 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

4. Goals Estate Planning Financial Inventory Retirement Income Shifting Ownership and Asset Transfer Shifting Control and Compensation Investing Off-Farm Insurance Advisory Team Communications Time for a ChangeProgram Topics

5. 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.

6. 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. Estate Planning Issues

7. 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. Financial Inventory

8. 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 Retirement Income

9. 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 Ownership & Asset Transfer Alternatives

10. 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 Shifting Control &Compensation

11. 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”. Investing Off-Farm

12. 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 Insurance

13. 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 Advisory Team

14. 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) Communications

15. 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 Program Delivery

16. 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

17. 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.” Impact

18. 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 Follow-up

19. New Approach • Website and CD • Video streamed presentations • Links to fact sheets and other valuable information www.agecon.okstate.edu/TFAC

20. Questions?? For more information contact: Lori Shipman 405-744-9836 Lship@okstate.edu J.C. Hobbs 580-237-7677 Hobbsj@okstate.edu Damona Doye 405-744-9836 Ddoye@okstate.edu