Webinar: Ag Estate Planning During a Pandemic
With Allan Vyhnalek, extension educator for farm and ranch succession, Agricultural Economics; and Monte L. Schatz, attorney and managing member at Vandenack Weaver LLC.
While 90% of farmers and ranchers say they expect COVID-19 to impact their businesses, over half do not have a plan for what would happen to the business if they fall ill, according to two surveys by Farm Journal and Farm Market iD. The ongoing COVID-19 pandemic further highlights the importance of preparing the next generation to manage the farm or ranch.
The webinar will offer background on common mistakes made during the process, the importance of having a formal succession plan in place and essential considerations and tools for creating an agricultural estate plan.
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[00:00:00.000]Allan Vyhnalek: We'll go ahead and get started and welcome. Good afternoon, everyone. I'm out and and all I can. You can see on your screen to be
[00:00:08.700]Allan Vyhnalek: Monte with us. I'm on two shots from the law firm will be to that in a minute. But we have
[00:00:15.299]Allan Vyhnalek: A special seminar that in addition to our Thursday series from that econ requirement. That's talking about how we do farm and ranch Transition. Transition and succession during a pandemic.
[00:00:26.610]Allan Vyhnalek: And there's my contact information and I'll add that up again at the end of the end of the session to and and just, you know, the session will be recorded and available on the farm that URL daddy website.
[00:00:40.830]Allan Vyhnalek: Okay.
[00:00:45.780]Allan Vyhnalek: So this is special, and I was contacted about a month ago, maybe five weeks ago by event vendor that can either mine shots their attorney was working with me and they wanted to put on a special
[00:00:57.870]Allan Vyhnalek: Endemic webinar for people to to attend to listen to. And we wanted to focus on what producers do in terms of succession, and then a pandemic.
[00:01:06.120]Allan Vyhnalek: I'm going to talk for about 2025 minutes and then we'll turn it over the monies are turning from the laufer he's going to visit with you and then we will
[00:01:15.090]Allan Vyhnalek: We're gonna take some time for questions. So we're going to talk how we plan on going until 115 or so if we need to, and get some questions answered. So please hang on and ask us questions, you will probably be able to do that via the
[00:01:29.160]Allan Vyhnalek: Chat box. So please start put your questions in the chat box and there's that form that you know website where you can see this
[00:01:38.670]Allan Vyhnalek: This series this webinar and other webinars in this series, and it also includes those connections to like my succession page so
[00:01:47.400]Allan Vyhnalek: Thanks to money for being on with us this afternoon and I appreciate that very much and thanks to them for for contacting me to do this.
[00:01:55.620]Allan Vyhnalek: This, again, is my contact information and know that that that how you conduct you know.edu slash succession page I have all my stuff I've written some new articles during pandemic. I've got my videos up there from last fall and see you. Welcome to look at that stuff that you want.
[00:02:12.450]Allan Vyhnalek: Okay, how does the pandemic change succession. Well, in my view, it makes everyone's demise more real event clearly captured our attention, especially when you have 151,000 people and passed away that captures your attention.
[00:02:28.530]Allan Vyhnalek: But we're going to pass away, one way or another from different very different reasons. I mean,
[00:02:33.150]Allan Vyhnalek: From a farm succession standpoint, it really doesn't change the need to have a plan. We still have to have a plan, whether the pandemic or not because
[00:02:40.170]Allan Vyhnalek: The pandemic gives us another way to to go, but we can go with a heart attack. We can go with a brand years and we can go with cancer. There's a myriad of ways that we don't, we're not no longer around and we have to face that fact.
[00:02:53.550]Allan Vyhnalek: And the bottom line is succession planning would be essentially the same with or without a pandemic and so I would suggest, if you do not have a plan. Did you get one place because it's important to have that
[00:03:05.700]Allan Vyhnalek: What are we planning retire. We talked to farmers and and had did a survey with them and I probably need to update the survey ready but
[00:03:13.740]Allan Vyhnalek: But we asked him, when you play retire in the top two categories 35%, at least at some plans in time, but the bottom three categories.
[00:03:21.870]Allan Vyhnalek: 54% nine plus 24 plus 21 50% of never plan to fully retired from far they give up some control, they're going to plan to do there did semi retired.
[00:03:33.450]Allan Vyhnalek: But they're never completely out now look at the island numbers and you see here 31% never retired and 47% semi retired. I think that adds up to like 78% never plan to retire from farming.
[00:03:47.490]Allan Vyhnalek: And so we have to understand about farmers is that they're having a difficult time giving up control. And if you look, you ask the question, why are you
[00:03:56.640]Allan Vyhnalek: Tired earlier he only similar retiring and we're seeing that 75% have a difficult time giving up control the farm.
[00:04:03.090]Allan Vyhnalek: How are they able to continue to farm well because they have really modern farming equipment, the GPS steering and all that sort of thing.
[00:04:08.910]Allan Vyhnalek: And it allows them to form longer one farmer. I talked to you once said,
[00:04:13.290]Allan Vyhnalek: Farming suddenly fun. I've got the tractor I push the buttons in the field takes me cross I turn around. Push the button again and brings me back. So it's an important thing to
[00:04:23.310]Allan Vyhnalek: Have but if it's really handy and it helps with the efficiency and helps with us being able to to farm longer as we get older.
[00:04:30.570]Allan Vyhnalek: I really, they don't want to think they're not thinking about retiring because they really retirement to their own mortality, you don't think about destiny.
[00:04:37.740]Allan Vyhnalek: That the bad news is that they can't afford to retire. The good news is, they're healthier, longer, healthier longer and healthier, longer life. Sorry, I
[00:04:46.770]Allan Vyhnalek: Have a double word there and I need to correct and the 55% say they don't have a successor, just over half do not have a successor
[00:04:54.780]Allan Vyhnalek: And just over half don't know what else they do one farmer. I was talking to said, I don't want to go to the town to the to the coffee shop.
[00:05:05.550]Allan Vyhnalek: I am not going to go to the bar and play cards I
[00:05:10.650]Allan Vyhnalek: Only I love to go to football games or watch football games. But that's only a few months to a year. I don't know what else I do, as long as I get up in the cabling to keep farm.
[00:05:18.000]Allan Vyhnalek: So it's a very interesting thing to think about when you think about why people don't want to quit their farming operations.
[00:05:26.580]Allan Vyhnalek: I'm not trying to embarrass anyone who thinks they have to retire because you got plenty retired. So don't, I'm not asking you retire, think about
[00:05:33.750]Allan Vyhnalek: Harnessing the lesson on the idea that no one. Avoid supply box. We haven't figured out how to get rid of that haven't had avoid that yet. We're all going to have a demise.
[00:05:43.050]Allan Vyhnalek: And so the key question is what happens to your stuff when you're gone. That's why you need to succession, you won't have any thoughts about what happens to your stuff after you're gone, then you better get that plan in place that's
[00:05:56.340]Allan Vyhnalek: Don't worry about retiring. But you think about the demise. And what happens to your stuff that
[00:06:03.720]Allan Vyhnalek: As more often than not planning tends to be deferred until some critical life event occurs, which forces the family to address the matter.
[00:06:12.600]Allan Vyhnalek: We didn't do any state planning. We didn't do a succession planning and now all of a sudden the matriarch or patriarch just passed away whatever reason, or they get get really ill or there's a pandemic and they get buyers and
[00:06:26.040]Allan Vyhnalek: Now we have that critical life events occurring and we have to address the matter what happens to stop or what happens next with the farming operation. What happens next to that business.
[00:06:35.880]Allan Vyhnalek: And I don't know about your family, but I can guarantee you that. My family doesn't make great decisions when we have all that stress in our lives.
[00:06:45.390]Allan Vyhnalek: We need to do this while we can have a clear head and everything's calm and everything's normal instead of waiting for that critical life event that disaster if you were
[00:06:55.770]Allan Vyhnalek: To happen to us personally, I didn't have to make a decision, with all the stress going on. That's the key point of this slide is to say why we wait till we have that disaster. Why don't we get after it when we could just plan and normally
[00:07:11.820]Allan Vyhnalek: We don't like to plan because which could you complicated resume it's mental work. I was visiting with Monty yesterday, we did a little warm up for this yesterday afternoon we and I mentioned to him that
[00:07:23.400]Allan Vyhnalek: We, we often we often listen to lawyers and lawyers jukebox things in their own language. And that's really hard to
[00:07:32.100]Allan Vyhnalek: Keep track what they're telling us and what they're saying. And so when we visit with people like that those professionals, they tend to plug the cylinder of the brain. And so it's mental work and so
[00:07:42.630]Allan Vyhnalek: It just becomes hard for us to keep up with what they're saying. I like that was true for me.
[00:07:47.820]Allan Vyhnalek: Some people just don't want to think about the wrong one mortality or their own death and we're afraid of reduce something we do something now it'll be wrong in the future.
[00:07:56.010]Allan Vyhnalek: And guess what, if you do something now, it will be long in the future. But I'm saying you don't know when you're going to check out. So get something in place. And if you need to change it to be changing.
[00:08:07.260]Allan Vyhnalek: My experience with lawyers and others that work in a serious it is simply this. Let's put a plan in place. Now, if it's wrong three to five years from now, and we're still around, we can change it. Once we don't do a revocable trust your stress.
[00:08:22.590]Allan Vyhnalek: And the mistake would be not to do anything and have this catastrophic catastrophic event occurred which is going to cause us to make that decision. So let's do something
[00:08:33.510]Allan Vyhnalek: If we have to change it later, you're talking about a few hundred thousand a few hundred dollars to $1,000 or so to change it. Whereas if we don't do something and we have our affairs in the wrong order.
[00:08:44.940]Allan Vyhnalek: Then we're talking about 10s of thousands or hundreds of thousands of dollars worth of the mistake. And that's what we're trying to avoid
[00:08:52.260]Allan Vyhnalek: What I find happens is people get into I've coined this phrase and circle of inaction, but I should have a plan.
[00:08:59.640]Allan Vyhnalek: I need a number one show plan now to now. I wrote a meteor me lawyer video number three last column K. Give me a headache to learn is confusing me. And so I go to number four, no action taken this time.
[00:09:11.550]Allan Vyhnalek: And the number for part of that circle. The action is interesting because you'll sit there for three months to three years or longer.
[00:09:18.510]Allan Vyhnalek: I want to, I know that it happened to be too. I knew that I needed to update my will. I need to do update what was happening to my stuff.
[00:09:26.880]Allan Vyhnalek: As I was starting to teach these things and I probably waited three or four years before I really went in and updated my
[00:09:32.760]Allan Vyhnalek: I had a will, but it was the early marriage. I love you will know the words we just basically went in and said, Honey, were first married. We need to have a will in place and so
[00:09:44.160]Allan Vyhnalek: Honey, I love you. Here's my stuff. Find gone and she said, Honey, I love you. Here's my stuff I'm gone. And here's who we want to have take care of the children if we're both gone
[00:09:52.620]Allan Vyhnalek: Here's we're going to have the Godhead assigned guardianship. Now you get older, in life, you start to own assets, you have to give her that.
[00:09:59.460]Allan Vyhnalek: That early well and you start talking about what's happening to your assets and that's when you need to update that plan.
[00:10:04.560]Allan Vyhnalek: And so don't get in that no action at this time. I know it happened to me and then I talked to lawyers have happens with lawyers all the time that those kind of things.
[00:10:13.260]Allan Vyhnalek: So get out of that circle of an action. Think about sequential idea ideal planning or sequential finding. I should have a plan or the hopefully there hasn't been a construct
[00:10:23.520]Allan Vyhnalek: I go to a meeting and or even the lawyer, the family means to explore options options developments, especially now, are you going to get this done in three days.
[00:10:34.080]Allan Vyhnalek: Are you going to just dozens released. Probably not, but you can get this done in three, six months will sit here at the beginning of August, and you certainly could have this done by Christmas, if you put your mind to it really work at it and give it some thought. The main thing is
[00:10:47.970]Allan Vyhnalek: To keep going and keep working forward and try and get to these steps so that you can even pull together that estate plan that succession plan that business plan. So everything makes sense for your next generation.
[00:11:03.180]Allan Vyhnalek: Now, hey, this kind of goes along the lines of people making mistakes. And I'm not trying to say anybody's ever made a mistake. But I'm telling you the parents make assumptions and some of them don't end up being very good
[00:11:13.920]Allan Vyhnalek: Good assumption to parents make is our businesses, our business does not get shared
[00:11:18.960]Allan Vyhnalek: With the last name of knowledge that's check and between check in German and Polish and some other ethnicities in Nebraska, we have
[00:11:27.090]Allan Vyhnalek: Quite a bit in Nebraska covered and I could show you those European descent folks like check and German and Polish and all them. I get to be very private with their information that's kind of been a
[00:11:40.590]Allan Vyhnalek: Value of the culture and I get that. And I'm not being critical of that, but sometimes parents, hang on to that information to the point that they don't ever chilled. Tell her children when they decided, and children, since there's no safe plan.
[00:11:54.630]Allan Vyhnalek: All I'm saying is share that information with your children and tell them to keep it private. So you can respect you, your thoughts, but you still have that information shared
[00:12:06.180]Allan Vyhnalek: Even if I'm gone. I think everything will be fine because my kids get along great. Now I know like continue when I die. Why, that's it, that can work. Okay.
[00:12:15.960]Allan Vyhnalek: But it also seen situations where that's been a disaster. Don't assume that you kids will get along great right now because in some cases, the parents are the glue that holds those children together the parents being there are the glue that holds
[00:12:29.880]Allan Vyhnalek: Upside parents are gone. And then things
[00:12:34.080]Allan Vyhnalek: I know my children want to keep this farm acid in the family, even when we are gone. No, that's true because it's just important to me that is kept in the family.
[00:12:42.570]Allan Vyhnalek: And I can tell you that I visited with one family to wear a daughter called and sit on the executive state mom just passed away.
[00:12:51.090]Allan Vyhnalek: Mom's dying wish was that the farm be kept in the family.
[00:12:55.350]Allan Vyhnalek: There's three of us in the family. My mom. The oldest sits on the executor or the you know the person has to handle this. My middle brother and a younger sister, and it turns out one of the one of those two didn't want to keep the farm. They wanted the mind.
[00:13:09.600]Allan Vyhnalek: And depending on how bad that farm titled as it goes on and in this case it was Tenants in Common guess what the person that wants out can petition the state and get that
[00:13:19.560]Allan Vyhnalek: So, you know, they get that asset. So, so they get there 130 in this case and that didn't follow mom's wishes.
[00:13:27.390]Allan Vyhnalek: BUT MOM'S gone so if you want. I think this is a kind of a big challenge area because if you want to control what happens to your acid, you may be considered that before your dawn. On the other hand, if you're gone. And, you know, don't assume you children, keep it at times.
[00:13:43.950]Allan Vyhnalek: I'll be gone. I don't care what happens to kids. I'll just have to figure out how to divide myself well
[00:13:48.810]Allan Vyhnalek: That's a good that's a fine assumption and keep gets you out of being a trouble with your children, but I don't think it's good to get along, or they'll have the data to go very smoothly and I think. So that's, I think, the assumption is that
[00:14:03.420]Allan Vyhnalek: And since I have four children this case, but it could be any number of children, my assets have to be by 25% equally so I'm fairly to do it. So I'm talking to one farmer. He comes up to me says
[00:14:14.490]Allan Vyhnalek: Hey, yeah, other than farm with mom and dad for 50 years and dad's been gone for a couple years, and mom just passed away. Earlier this year, and
[00:14:24.840]Allan Vyhnalek: A true story. By the way, very true story. And we got around to renew the will, about a month ago. And even though I've been on the farm good mom dad 50 years, my brothers and sisters haven't been here. There's four of us.
[00:14:36.930]Allan Vyhnalek: The wheel says Atlanta has to be divided 25% each week, last one from fairly good
[00:14:42.870]Allan Vyhnalek: And this guy was in his late 60s. And he goes, I can't afford to buy my brother sister out. I said, yeah, you can do without a bank loan you the money to buy your brother sister out at 6067 68 years old.
[00:14:56.340]Allan Vyhnalek: You won't get that money from anywhere to buy your brothers and sisters out you. I think you're just going to end up selling if your brothers and sisters aren't willing to go with you and keep you on the farm.
[00:15:06.150]Allan Vyhnalek: Parents have to understand that even though their cultural background, especially the German check Polish all those those cultural backgrounds were used to says that
[00:15:17.160]Allan Vyhnalek: That's attached to you by equally that may not be the third way to do it as matter of fact, I was at one conference last year where
[00:15:24.660]Allan Vyhnalek: They said that for every year that young taxi me every year that farmer has been out there with mom and dad, they should get 1% acid.
[00:15:31.350]Allan Vyhnalek: So that this guy is now two years he should get the first 50% and then you can delegate upset and still by four ways he still gets his share that, too. So, and that was just one example. I'm not saying that's what has to be done through something
[00:15:45.750]Allan Vyhnalek: Someday son or daughter is 12 years and too bad. That could be a really good assumption, a really bad some serious medical act as if this farmer said it was on the previous points summed it my debts and some days of outcomes outcomes.
[00:15:57.750]Allan Vyhnalek: So these can be great assumptions they can work out for your family. However, I've talked to far too many families where they don't work out very well.
[00:16:06.930]Allan Vyhnalek: So we're going to have a conversation with a family within a family about what's going to happen to stuff. What's going to happen to that farm acid, what's going to happen that business.
[00:16:15.030]Allan Vyhnalek: The first key assumption or first key commitment to our family should make is when you're done. Are you still gonna have a family.
[00:16:22.410]Allan Vyhnalek: Don't make that assumption. Get that commitment. You get the family together and you say, so we're having a discussion about what should happen to stuff land tractors machinery moms yellow pipe played all this whole whole household stuff goes down.
[00:16:37.710]Allan Vyhnalek: But let's let's let's have a commitment that we're still gonna have a fan who they were still going to get you. Other Christmas and Easter and whatever we do weddings and funerals and all that sort of thing. Let's have that commitment first
[00:16:48.750]Allan Vyhnalek: Don't know if that's not have that assumption. And I think that changes the working conversation. I think that's changed the tenor, I think I choose change gets the ground floor that we want to keep the family together.
[00:17:00.870]Allan Vyhnalek: Secondly, YOUR MOM, DAD. GRANDMA and grandma on the same page or whoever's in charge that matriarch or patriarch, are they on the same page. Because if they're not
[00:17:09.120]Allan Vyhnalek: There should be no discussion about say plan because Delon essentially started talking to the kids and you'll start influencing their decisions in influencing what they think about it.
[00:17:19.080]Allan Vyhnalek: And you're going to be, it's going to drive a whole wedge and his family, so be careful about that. MOM, DAD. GRANDMA and grandma have to think about what they want to do first, and a better be on the same page. First
[00:17:32.010]Allan Vyhnalek: And the other thing I'll say about succession transitions, especially be transferring to somebody else on the farm is what is that future look like in a perfect world, what was your utopia. What would you love to have happen.
[00:17:42.180]Allan Vyhnalek: And if you're transferring it within your own farm that's going to look different than if you're don't have air.
[00:17:49.410]Allan Vyhnalek: Where if you're ending the business. So what if you're selling the business to a neighbor. What if you're selling it to the neighbor's son.
[00:17:54.930]Allan Vyhnalek: You know what happens to all that your world. And what do you think would have happened there. And what do you think's the right thing to happen. You should have that thought or that vision first and you start with visiting with your family about that and have good communication.
[00:18:09.990]Allan Vyhnalek: The main problem with communications is we don't listen
[00:18:14.220]Allan Vyhnalek: We, we kind of listen to, we're listening to think about what we want to say next. We're not listening to listen.
[00:18:21.360]Allan Vyhnalek: We need to be listening to clarify. I think I heard you say that and you repeat what they said if you can't repeat what they said. Then you weren't listening.
[00:18:29.640]Allan Vyhnalek: And if they say something you don't agree with you. Don't attack. You say, tell me why you feel that way. What makes you say that I'm concerned that this is happening to the dividend.
[00:18:40.320]Allan Vyhnalek: You have to just use careful messages and careful clarifying questions to continue the dialogue continue the conversation and don't get mad at your brother and sister or your parents because they're not saying what you think you have to say.
[00:18:56.220]Allan Vyhnalek: If you have your mind made up.
[00:18:59.640]Allan Vyhnalek: Then, are you going to listen, I would suggest that you have to think about that first check your thoughts into the door.
[00:19:05.640]Allan Vyhnalek: Check your, your opinion at the door and go in and listening and ask clarifying questions and make sure that you hear heard what exactly what they're saying.
[00:19:15.390]Allan Vyhnalek: And then you build your conversation to do the future.
[00:19:18.990]Allan Vyhnalek: Based on what you agree what you would agree with me, there's always going to be something that somebody will say in your family to would agree with you say I agree with that part of it. Now let's talk about the rest of this and what. What makes you say that
[00:19:30.930]Allan Vyhnalek: And to be true. Our parents didn't necessarily give us great communication. So our children's generations are going to need me and my mid 60s.
[00:19:39.360]Allan Vyhnalek: Were really always received great communications, but I can guarantee you that children will require better communications will we receive to be sure you provide that
[00:19:48.330]Allan Vyhnalek: You're going to transfer on to the next generation. If you're that lucky to have somebody coming back to the farm or ranch with you. That's awesome.
[00:19:54.720]Allan Vyhnalek: And you know one thing one step is to make sure the next generation will do all the tasks. I'm talking to one farmer and he goes, Well,
[00:20:02.550]Allan Vyhnalek: I think my son's going to come here and he's going to drive the tractor with the push button steering and the GPS and all that. I don't need him for that. I want to do that farming. So on the phone, same guy talked about
[00:20:12.270]Allan Vyhnalek: What I need my son to do is go expense what I eat my son to do school work with my, my knees hurt my back hurts and I've done that for decades. And I just get more out my body's wearing out
[00:20:22.560]Allan Vyhnalek: I need my son to do those tasks that I can't physically perform as well. And I think that son's got it wrong idea utopian idea about what's going to happen here and I needed to do I need him to go to top the roof and paint the barn.
[00:20:37.950]Allan Vyhnalek: The barn painting. I am do all the tasks. So make sure that we have some type of testing phase, but to be true. We can't just put a young person back in the farm and they can do all the crap jobs because I wanted to get a standard business end of a pitchfork and say we're
[00:20:52.980]Allan Vyhnalek: Not very long. And they'll say, Oh, forget this. I'm gonna go do something town or don't be out of there. So you have to have mentioned transfer management transfer is really tricky because
[00:21:05.400]Allan Vyhnalek: You can't just give the young person younger people. I don't care how good they are, the whole farm and say, manage it because what'll end up happening is they will be
[00:21:14.580]Allan Vyhnalek: They will make decisions that you wouldn't have made and you're going to be mad at them for making those decisions and they're going to be mad at you because you didn't let them make the decision. So you have to make sure that you
[00:21:24.570]Allan Vyhnalek: Do manage your transfer very plan with timing. In other words,
[00:21:28.500]Allan Vyhnalek: I when my son was coming back to the farm with me. I'm going to give them one ad or one quarter and that's there's to manage or I'm going to give them a part of the Convert that's your calories manage or whatever it is, but I'm going to give them just part
[00:21:40.500]Allan Vyhnalek: If they screw up their management of that quarter. It's not going to be a big enough operate a big enough deal in my operation to take us all wonder
[00:21:47.610]Allan Vyhnalek: But they get to learn from that. Because how do all of us any out of any of us everywhere we learn by making mistakes.
[00:21:54.300]Allan Vyhnalek: So management transfers important and then he has to be thought through and and you give them part and let them be completed control that don't question anything
[00:22:02.400]Allan Vyhnalek: But then you make sure you keep good profit loss on that. So you were there at how they did. And as they gain more experience you get more to do.
[00:22:11.190]Allan Vyhnalek: And then after that you have the acid or enterprise transfer going on. I don't have time.
[00:22:15.360]Allan Vyhnalek: In my two or three minutes. I have. LAUGHTER You can talk about that. So I'm just going to say that that can be done. It's not as difficult as it seems, and Asia transfers where we tend to get hung up.
[00:22:25.740]Allan Vyhnalek: Again, that that could be planned and done relatively cleanly and then the whole farm this fine line transferable typically occur in depth of the matriarch or patriarch, mostly because
[00:22:36.930]Allan Vyhnalek: Depending on how we have the landowner and how to if there's corporate structure or thing what what corporate structure you have, then you want to make sure that farmland this that foreign land or form business transfer occurs a debt. So you get to increase the capital gains but
[00:22:51.600]Allan Vyhnalek: The increase in the capital gains big pieces for the next generation. Make sure you get the basis increase. So that's usually going to happen it down to you. We don't sell ground to your kids while you're still alive because you're going to have a Catholic musician.
[00:23:06.690]Allan Vyhnalek: And do all this written plans haven't written down. Never thought out how the thought through and make sure you get a professional healthy right those plants need to you, and I'd be glad to help people if they if they want me to be working with
[00:23:17.100]Allan Vyhnalek: Have a structure and you management structure may also include job descriptions and have exit plans. What son after three or five years decides he wants our operation look dad or mom contract cancer.
[00:23:29.490]Allan Vyhnalek: Two to five years needs to step out of the operations then has to have exit plans for both generations and use job descriptions to make sure that all of this works together properly.
[00:23:38.220]Allan Vyhnalek: As far as a viable my job description says to my son's going to be in charge of breeding operation and I ability to be in charge of breeding operation.
[00:23:45.240]Make sure it's
[00:23:47.430]Allan Vyhnalek: A very may or may not have ego. I already talked about that there's a perception different depending on your point of view. In other words, if I'm the on farm kid my perception on my contribution is very high, if I'm the off farm kid on this a little Johnny
[00:24:00.810]Allan Vyhnalek: Never did much beside her. I ride a mom dad's coattails mom and dad have I've been to brings it operation. I think the to fly somewhere in between. So be careful about that.
[00:24:10.800]Allan Vyhnalek: And over the years, every talked about this mom, dad, felt that the pipe sizes have to be equal with. Is that fair. In some cases, yes. In some cases, probably not.
[00:24:19.890]Allan Vyhnalek: There's no one great solution to this, but you have to consider it and do it the correct way I've been pretty much concludes my
[00:24:26.970]Allan Vyhnalek: Talk. I'm giving you 20 minutes out of a two and a half hour talk all my talk is up on that form succession web page. I've done the screen right now and it's broken down at age 12 minute segments. And so you don't have to watch the whole thing at once.
[00:24:39.270]Allan Vyhnalek: I know that other farm, you know, TV other information about from our extension for managing teams farmed out you know that edu.
[00:24:47.160]Allan Vyhnalek: And Monday, I think I got done pretty much right on time and ready to have you take over. Here's the other websites more information you could probably pull this thing back up and take a look at those.
[00:24:57.840]Allan Vyhnalek: job roles and great articles there the beginning farmer centered. I'll states. Very good. And so too are very solid two
[00:25:06.300]Allan Vyhnalek: Things. I'm there. I should mention my now. Or maybe I can mention to the end of the webinar. I'll come back and pull the slide up the digital editing webinar.
[00:25:13.350]Allan Vyhnalek: Like we have two other programs coming up in August, and I'll be a part of those two. So for right now. However, I'm going to stop my share and I'm gonna let
[00:25:24.630]Allan Vyhnalek: You take over. And so money. The floor is all yours. Oh, that's what you expect.
[00:25:30.750]Monte Schatz: Terrific, thank you. And I'm just pulling up my
[00:25:34.590]Monte Schatz: screen right now.
[00:25:39.000]Monte Schatz: Make sure everybody can see. Can you see that
[00:25:43.650]Allan Vyhnalek: Yeah, but you may want to try and make it bigger.
[00:25:45.570]Monte Schatz: He's trying to keep it out. I'm trying to
[00:25:48.780]Monte Schatz: Get it.
[00:25:50.190]Monte Schatz: Blowing up here.
[00:25:53.880]Allan Vyhnalek: Oh, maybe see. I know you have to have Skyler help you figure that part out.
[00:25:59.340]Monte Schatz: Yeah, I may have to bring her in here. Hang on one second. Well, first of all, thank you for the opportunity to for me to present on this. I
[00:26:10.260]Monte Schatz: I grew up on a farm in northern South Dakota and that does not by any stretch
[00:26:18.780]Monte Schatz: Make me an expert, because I'm 40 years removed from from actually being on
[00:26:26.250]Monte Schatz: On a farm. But I do have some familiarity with it and I do work with quite a number of agricultural clients and so forth and
[00:26:38.460]Monte Schatz: Bear with me here.
[00:26:39.390]Allan Vyhnalek: There's a green button in the upper left hand corner with no no
[00:26:44.430]Monte Schatz: Right there.
[00:26:45.600]Allan Vyhnalek: Maybe him try that. Yeah, try that.
[00:26:49.350]Monte Schatz: There we go. That better
[00:26:51.390]Allan Vyhnalek: Yes, absolutely.
[00:26:53.550]Allan Vyhnalek: There you go, your slides. Yeah, they go to your site.
[00:26:55.860]Allan Vyhnalek: Right, I get back to your first slides first
[00:27:15.090]Monte Schatz: First time I've done this on a Mac, so I'm
[00:27:24.180]Monte Schatz: You're almost there.
[00:27:28.200]Monte Schatz: Okay, there we go. Okay, so my time. So anyway, I grew up in a farm in South Dakota and I've done a lot of estate planning and I'll tell you.
[00:27:39.180]Monte Schatz: The message at Ellen gay was frankly terrific. Because here's the bottom line. And I'm going to, I'm going to present a few legal concepts to you and so forth in my share of this, that, that being said though.
[00:27:58.050]Monte Schatz: The thing that's critical, is I see a lot of lawyers at and Ellen alluded to this in his, his discussion that talk about
[00:28:07.080]Monte Schatz: You know, they're brilliant and analysis. They can draft very thorough documents but at that. But at the end of the day, when you get done with your estate planning lawyer business lawyer.
[00:28:20.340]Monte Schatz: You know, is the plan going to work be practical and practice. I mean that that's your that's your bottom line. And all of this.
[00:28:28.440]Allan Vyhnalek: And mine, mine triangle in that upper right hand corner, hit the play button and you do have your slides go clear across doubles your whole screen.
[00:28:37.200]Monte Schatz: Okay, my
[00:28:39.240]Allan Vyhnalek: Shows play slideshow point
[00:28:43.260]Allan Vyhnalek: Right on the right hand side there. You're on the right and keep going. Right, right, right. Keep going. Right.
[00:28:47.340]Monte Schatz: Yeah. My problem is is I got a bunch of other boxes here.
[00:28:50.640]Monte Schatz: That are there we go, not being able to move them to see it. I got a advertisement here that's blocking it
[00:29:05.100]Allan Vyhnalek: Sorry about that. That's right.
[00:29:22.050]Allan Vyhnalek: I'm sorry.
[00:29:26.040]Monte Schatz: Yeah.
[00:29:32.490]Monte Schatz: Skyler just texted me she's gonna come in here and get me straight, now.
[00:29:37.920]Monte Schatz: My challenges. I know what you're referring to my my challenge right now though is, is I've got a bunch of boxes here that are blocking
[00:29:47.580]Monte Schatz: Actually blocking me getting to that far right side.
[00:29:55.620]Allan Vyhnalek: We can do the slide show.
[00:30:19.980]Monte Schatz: There we go. That's much better. There we go. Okay, my apologies to the audience for those
[00:30:27.180]Monte Schatz: I know how to operate these things. We just had a bunch of boxes and we have so much stuff coming up on this that it's it's hard to maneuver around it so
[00:30:37.110]Monte Schatz: Anyway, we got that resolved now so
[00:30:40.650]Monte Schatz: So anyway, the key is one of the things I wanted to reiterate, and then we'll get into a little bit more of the technical stuff on this or hopefully not too technical, is that it's good to have a team. I'm a firm believer in the estate planning team.
[00:30:58.290]Monte Schatz: You know, as a lawyer frequently I'm I'll be the person in that team that leaves a charge, but it's good to have your if you have an accountant or a
[00:31:08.280]Monte Schatz: well versed bookkeeper tax preparer involved. It's good to have them involved if you've got a real if you have life insurance, it's good to have your life insurance agent involved.
[00:31:18.780]Monte Schatz: Your banker might be a good person to have in there, somebody like Allen, who's
[00:31:23.910]Monte Schatz: Who is obviously great at facilitating these types of things. It's really good, because what that what the purpose of having that a state planning team is is that it's a good check and balance.
[00:31:36.000]Monte Schatz: If the attorneys getting too technical, and his analysis or he's or he or she is missing the boat so to speak on on doing a
[00:31:47.940]Monte Schatz: Correct analysis of the castle. The farm the financial position of the farm. The management issues and so forth. It's good to have that feedback. I mean, it's really true to
[00:31:58.650]Monte Schatz: Two heads are better than one. So that's an important thing. So anyway, on that note, now that I've got my technical glitches taken care of. Let's start with the PowerPoint slides.
[00:32:09.120]Monte Schatz: And I just want to reiterate the disclaimer down there while we are going to be talking about legal concepts and so forth.
[00:32:16.740]Monte Schatz: Nothing in my conversation should be interpreted to be specific legal advice specific key or situation or create a lawyer client relationship with anybody on here.
[00:32:26.940]Monte Schatz: As much as I love to all of you as my clients right away. We can't do it on a PowerPoint slide. So just a disclaimer for informational purposes.
[00:32:36.630]Monte Schatz: So the coven, you know what, what, what is it about Kobe that is going to make some
[00:32:43.410]Monte Schatz: Makes us environment unique or or anything of that nature. As far as
[00:32:50.130]Monte Schatz: As far as doing a state and business and succession planning, that's different. Well, there's a few things that are different, but I think
[00:32:58.920]Monte Schatz: Ellen really hit the nail on the head, which was simply that that everybody is going to have be impacted by their businesses, what's this going to mean for tax planning our valuation is going to be affected.
[00:33:12.990]Monte Schatz: You know, is there going to be, you know, we had that one situation where several farmers were having to, you know, to kill off that some of their
[00:33:22.980]Monte Schatz: Throw up, throw out some of their mouth. There was excess supply and all that. Are we going to run into those situations. Is that going to impact valuation. But I think the most. And as you can see here 90% of farmers and ranchers say that code will impact their business in various ways.
[00:33:41.280]Monte Schatz: But I think equally as important to focus on is that second point on this slide, which is 69% of farmers don't have a plan if they follow with coven 19 and this really goes back to what Ellen state at which is
[00:33:56.280]Monte Schatz: I think the significance of coven is that is that it forces us to face our vulnerabilities and our mortality.
[00:34:08.130]Monte Schatz: And it really should be a wake up call, and a time for all business people, but I would say, particularly farmers and ranchers to step back and say wow what, you know, what if I do go down. What if I get coven and I
[00:34:26.070]Monte Schatz: suffer more serious symptoms and I can speak from personal experience on that. My family and I have six members that are in my household. Now, my wife and I and four kids and
[00:34:39.570]Monte Schatz: And I, my whole family tested positive for coven we took a trip to Ireland where my son was studying abroad.
[00:34:46.260]Monte Schatz: And I will tell you it it altered my daily business in the law practice. I had a quarantine. I had to stay home. Thank God for the technology that we have here.
[00:34:56.550]Monte Schatz: Today that we're witnessing today where I could continue to do my work. Nobody was seriously.
[00:35:02.850]Monte Schatz: setback, but there was a slow down, period. I had a down month. My wife owns her own business. She had
[00:35:09.960]Monte Schatz: A bit of a down month and set it back and thankfully we were still be able to both hands on being engaged in our business. Well, similarly, you know, for farmers and ranchers, what does happen if you
[00:35:24.060]Monte Schatz: You know the Cove is that the coven set you back that
[00:35:28.650]Monte Schatz: In a, in a long term health or mental situation and it's so adversely affects you. That continuing the operation of the farm is going to be next year, next possible or
[00:35:41.940]Monte Schatz: Unfortunately, worse yet, the worst case scenario, it takes your life and that's what I mean by the vulnerability in that what is in place to take care of that.
[00:35:52.920]Monte Schatz: Well, here's where you know I can't say enough about you and elves extension and Alan's work in this area, which is keeping people's feet to the fire on thinking about
[00:36:05.850]Monte Schatz: You know succession planning business planning estate planning and to me what the best analogy I can use to to make this point is
[00:36:16.230]Monte Schatz: If you run into a scenario and every family will run into the scenario because as, as Alan said, ultimately, you know, we all pass away. Are you going to be ready and
[00:36:28.770]Monte Schatz: I the scenario, I'd use is if you know if a State Planning is a casino and business planning, do you want to be the house or do you want to be the gambler. I want to be the house.
[00:36:41.340]Monte Schatz: Because if I'm going to place a bet on what's going to happen all the variables that can go wrong and my chances of winning or losing
[00:36:49.080]Monte Schatz: I want to be the one running the actuarial numbers, doing the planning.
[00:36:53.880]Monte Schatz: Determining how much of a payout is I don't want to be the person walking into the casino and throwing my hundred bucks in the table and hoping I get 100 back or multiply that so
[00:37:04.200]Monte Schatz: So what needs to happen to pass to the next generation. Or if there's a next generation to establish your legacy well
[00:37:13.800]Monte Schatz: And and this is more Allen's expertise but proper training and proper training incorporates the use of external people, you know, lawyers, accountants facilitators and succession planning the type of work that effort, you know, Ellen does work on
[00:37:31.620]Monte Schatz: Life insurance agents that estate planning or business planning team. It's critical that you have them involved. And then of course you also have to have the what I call the internal training internal meaning.
[00:37:43.350]Monte Schatz: What specific to your farm operation hands on training of the next generation, getting them ready, not only for the daily tasks and so forth.
[00:37:52.710]Monte Schatz: But getting them familiar rise with the financing and the future plans and what they may have to face in terms of possibly buying out nonfarm relatives.
[00:38:02.580]Monte Schatz: access to the resources and the team that hopefully you will have in place that this is a serious business. And, and, as you know, with the, you know, with the
[00:38:13.260]Monte Schatz: Steady rent up and farmland, which I realized is backed off some, but many of you are, you know, quite frankly, know wealthy and have a lot on the table to to get an order.
[00:38:26.700]Monte Schatz: And farming shouldn't be unique and distinct in terms of having that proper training on one of the areas that we work in in our firm is family offices and
[00:38:37.440]Monte Schatz: Family Offices are entities that are created by people with the significant wealth.
[00:38:42.180]Monte Schatz: Where they create this team of professionals and they they utilize their services more hands on now. Typical farmer is going to be more hands on.
[00:38:51.150]Monte Schatz: His business than somebody that's cashed out of business, and now is, you know, managing their assets for the larger family.
[00:38:59.130]Monte Schatz: But regardless, the same concept should apply when it comes to your planning and that is establishing those contacts making that next generation aware of the resources that they'll have available to help them to continue to successfully run the farm operation.
[00:39:17.280]Monte Schatz: And and it's important. So think of is almost like a family office concept which is let's let's get the business structures in place that business plan in place the succession plan in place in the estate plan.
[00:39:28.890]Monte Schatz: To have a fluid transition of this business and and As stated previously family communication is is critical.
[00:39:38.220]Monte Schatz: You know, everybody likes to maintain a certain degree of privacy.
[00:39:42.510]Monte Schatz: I will tell you, by all means, and and we have structured where we can, and it's hard to do in today's environment because there is so much information that has to go public because of public filings, and so forth.
[00:39:53.970]Monte Schatz: But there are ways we can minimize you know the privacy being shared with the public.
[00:39:59.820]Monte Schatz: But the one area where privacy is not a good idea is when you're talking about, you know, the family farm and family communication.
[00:40:08.700]Monte Schatz: I will tell you unequivocally of the several hundreds of states that I've administrators
[00:40:15.180]Monte Schatz: The ones that go most fluidly with the least amount of difficulty transitioning things are the ones where the patriarch, and our matriarch of the family thoroughly communicated what they were going to do it.
[00:40:29.970]Monte Schatz: Through succession business and estate planning and let the next generation know there was, there were no ugly surprises. It is the best litigation avoidance tool in the world.
[00:40:41.250]Monte Schatz: You know you don't want to have your kids litigating in a state because of an ugly surprise that should have been shared with them before you passed away. So that's important.
[00:40:50.100]Monte Schatz: And then the next thing. And, of course, that we're going to delve into more detail here is the use of legal tools and legal structures to make sure there is a successful transition transition
[00:41:01.230]Monte Schatz: And what I call this group is so, so many times you hear these terms discuss separately, a state planning succession planning business planning.
[00:41:10.800]Monte Schatz: Also saw slide illustrates is although they each have unique elements that will cover briefly here in the next few slides.
[00:41:17.970]Monte Schatz: They really do crossover totally that they not none of these three concepts operation operate in isolation of the other. They all band together. And if properly structured
[00:41:31.800]Monte Schatz: The succession business plan in a state plan should speak each other and it should be a fluid and is nearly seamless as possible tool to transition the farm the farm to the next generation.
[00:41:47.880]Monte Schatz: Succession Planning, like I said Colby 19 what what it's what's happened is that it's it's made a realization of mortality and borrow vulnerability, now's a good time to talk about the transition of your farm.
[00:42:04.140]Monte Schatz: The, the business plan. Part of it is, is to me is how you structure the business. There's the business plan, how you as Ellen had alluded to, which is more of a business type of document.
[00:42:17.940]Monte Schatz: A well written well orchestrated, how are we going to run the daily operations in the near term in the long term for this business. What's that going to look like.
[00:42:28.110]Monte Schatz: Of course, with that, we know that things transition from one generation to the next. So now we start talking about succession planning. How are we going to
[00:42:37.350]Monte Schatz: Pass on that business, whether it's through life or and or at death and and how do you, how do you do the management responsibilities as they get passed down from one generation to the next.
[00:42:51.300]Monte Schatz: The succession plan is a critical piece in establishing a good estate plan and I would suggest, so none of these have to be done in a particular order.
[00:43:01.560]Monte Schatz: I will tell you, in my mind, and the most successful estate plans. I've seen are those people who start with a good business plan first
[00:43:11.520]Monte Schatz: And then articulate and translate that into okay now we have this well established business and how it's going to operate.
[00:43:19.200]Monte Schatz: How are we going to pass that from the current decision makers in the near term or in the future, the succession plan. And once you have those two pieces in place.
[00:43:31.290]Monte Schatz: Now, you're really ready to start talking about the estate planning estate plan can estate planning, not only means what happens at depth.
[00:43:41.040]Monte Schatz: But what are you going to preemptively do at life to maximize the most seamless transition of the farm operation from generation to generation to or in the event there isn't a generation to there isn't somebody to pass it on.
[00:43:57.960]Monte Schatz: How are you going to set up and leave your legacy as far as if you're going to cash out the form, how to do that orderly and so forth. If there are, you know, children who are going to take over the farming operation so
[00:44:12.750]Monte Schatz: as as as Ellen stated fair is not necessarily equal. There are several methods that we can use to to to assure
[00:44:25.140]Monte Schatz: As fair of a transition as possible while still sustaining the farm operation and again that starts with your business structures, creating legal structures that facilitate the transfer for a farm interests.
[00:44:40.530]Monte Schatz: Many of you might be sole proprietorship, I think as you go along. In this process, if you have, if you've been involved in it, you'll probably see that the formation of some type of a legal entities such as a Limited Liability Company.
[00:44:55.680]Monte Schatz: Or a corporation might be a better way to do it. Perhaps a in more sophisticated of state plans, a family limited partnership and so forth. So, but getting those structures in place is critical. The next thing that's also equally as important is
[00:45:15.240]Monte Schatz: The problem within farmhouses, as I'm sure all of you are aware of is that a lot of times it's the old saying, and it's a little bit stereotypical but there's a lot of truth to it. Yeah.
[00:45:26.160]Monte Schatz: Acid rich but liquidity port, not a lot of cash share. So there's going to need to be structured put in place, like, buy. Sell agreements where it you know the purchase.
[00:45:37.320]Monte Schatz: Will not be made in a lump sum, there may be tax reasons that's not that's not good. There may be financial reasons, whereby
[00:45:44.460]Monte Schatz: If the on on farm air that stays on the farm has to purchase and buy out the interests of the other non farm, there's
[00:45:52.860]Monte Schatz: There's got to be a structure that can be done or we could simply there just isn't enough liquidity.
[00:45:57.780]Monte Schatz: To do that in a lot of cases, unless there's a sizable life insurance. Which brings me to my next point. Use of life insurance and doing that in an orderly manner to assure that there's not unnecessary taxation of
[00:46:14.760]Monte Schatz: The life insurance proceeds. And we'll go into that briefly down the road.
[00:46:19.380]Monte Schatz: And then use a trust. I will tell you that, front, front end full transparency, our firm is a big believer in the use of trust and they don't need to be as inflexible and I would emphasize the use of flexible trust and so forth. So
[00:46:36.480]Monte Schatz: And we'll discuss that briefly in the short amount of time we have, but again,
[00:46:42.840]Monte Schatz: started going back with the overview. I
[00:46:46.080]Monte Schatz: Farm and ranches have business models that require different planning considerations and liquidity is a huge issue. But right now with coven 19 and and the
[00:46:56.970]Monte Schatz: I wouldn't say the probability, but the definite possibility that you might catch that. And it might have more adverse
[00:47:06.750]Monte Schatz: Symptoms for you that may set back your ability to daily managed now's a good time. If you have an auntie, or if you're a sole proprietor. What do you have in place.
[00:47:17.010]Monte Schatz: Or, Who do you have in place among your family members, whether that's in a corporate setting or
[00:47:24.000]Monte Schatz: Were in your operating agreement, it will tell you who should who should take over in the event that the current president CEO is unable to either passes away, or is in capacity to review those agreements, see what you have in place.
[00:47:38.160]Monte Schatz: Review your business structure. If you're a sole proprietorship, does that make sense. Are you better off being a Limited Liability Company A limited partnership a corporation.
[00:47:47.880]Monte Schatz: There's several different entity forms. There's no one size fits all. We just have to look at an attorney has to look at that on a case by case basis and make that something that is tax advantageous provides asset protection for the farm assets and at the end of the day.
[00:48:07.710]Monte Schatz: It does not inhibit the daily operations of farm. You don't want to have to become an armchair lawyer looking over your corporate entities and
[00:48:15.750]Monte Schatz: Don't let the tail wag the dog. In other words, make those agreements work for you that they're fluid and work and working
[00:48:22.080]Monte Schatz: And the attorney should make sure that they work in real practice. Um, so anyway, that that goes, I just reiterated my last point on that slide, slide. Look at consider whether an entity needs to be put in place and when Dr drafting the
[00:48:38.550]Monte Schatz: Documents for that and there's and I just shared this next slide with you to show
[00:48:43.410]Monte Schatz: That there are organizing documents. The only one that doesn't have one as a sole proprietorship, if you decide to continue to be a sole proprietor without a corporate entity.
[00:48:53.370]Monte Schatz: You're going to want to have an organizing document a more detailed business plan.
[00:48:58.830]Monte Schatz: All these other documents only reason I share this with you. We're not going to go into detail on them, but it's important that you review those agreements and see what kind of provisions, there are
[00:49:09.690]Monte Schatz: If you become incapacitated unable to you continue to be alive that are unable to manage the farm.
[00:49:16.350]Monte Schatz: Who can take over those management decisions and then ultimately if you pass away, who take who steps up in the corporate entities to take over the farm operations. Good time to review that
[00:49:31.560]Monte Schatz: One of the things that's, of course, one of the big provisions in the PPP loans and I just shared this slide with you. This is a map of the state in a
[00:49:39.450]Monte Schatz: brassica and it shows it shows the concentration of where the PPP loans went under the Care Act. And as you can see there that dark blue is 17 to 25 million and guess what
[00:49:52.950]Monte Schatz: Not a whole bunch of that's in metropolitan Omaha. A lot of that is in central and western Nebraska.
[00:49:58.920]Monte Schatz: That tells me significant farm operations that a lot of that. And in fact that's verified by the statistics because 18.6% of the PP loans in the State of Nebraska were in the agricultural sector.
[00:50:14.160]Monte Schatz: Similarly, this is just another variation that shows a breakdown. We were talking about type of entity that should
[00:50:23.370]Monte Schatz: Perhaps a farm should consider looking at as you can see there overwhelmingly that a significant portion of the PPP laws went to corporations.
[00:50:35.790]Monte Schatz: And limited liability companies and so forth. Partnerships relatively few self employed individuals relatively few Sole Proprietorship relatively few. So what this slide tells me is that, you know, more and more businesses.
[00:50:53.730]Monte Schatz: Have the structure and have more sophisticated structures to handle a handle these types of situations. Perhaps this is something you might want to look out for formation of your entity.
[00:51:04.290]Monte Schatz: And I would be willing to bet I don't have the breakdown of each of those entities which of those were actual farm operating LLC or corporations.
[00:51:12.420]Monte Schatz: But I would be willing to bet that quite as a significant amount of them were and as more significant than the loan count is look at the jobs that were affected under those that were corporations and limited liability company so big impact there.
[00:51:28.080]Monte Schatz: So now we get to the state plan. So you've got your succession plan in place. You've got your, your corporate entity in place in your business plan in place.
[00:51:38.280]Monte Schatz: So now what do we do within a state plan. I will tell you the single most important document when you go to an attorney or if you start with an accountant or other financial advisor and then
[00:51:50.850]Monte Schatz: Next step is maybe go to the attorney to draft the documents, there should be a whoever you retain for those services should have a good estate planning intake form.
[00:52:03.150]Monte Schatz: What is that i mean it's it's basically a recap of all of your
[00:52:10.050]Monte Schatz: Finances where you sit, as far as how your assets are held how that whose name, they're held in. Are they joint tenancy. Are they in the form of a trust. Are they in a payable on death and that type of thing.
[00:52:22.500]Monte Schatz: That is the critical document and that it should be the document that stimulates a
[00:52:28.320]Monte Schatz: thorough discussion with the attorney and perhaps other members of the estate planning team IE accountants life insurance agents of life insurance is involved in other players that help orchestrate this
[00:52:42.690]Monte Schatz: an estate plan should include a last will and testament, I will, as I stated before we can to be more
[00:52:50.730]Monte Schatz: Focused on the use of revocable trust we find them to be more flexible vehicles we find them to be vehicles that allow for more tax planning and they're more fluid.
[00:53:02.130]Monte Schatz: A will, is it should be in place, we use what's called a poor over. Well, which is basically if somebody if we have a trust setup.
[00:53:12.930]Monte Schatz: And most of the farm assets are set up in that trust. Sometimes people as they go along, don't get the title of their other assets, he might have bought a piece of ground and forgot to title and a trustee may have bought a piece of equipment forgot to put it in a trust.
[00:53:29.910]Monte Schatz: If a person passes away without that happening. The will will then tell it to put it into the trust or pour it over from the estate into the trust so everything gets funneled in is controlled ultimately by the revocable trust.
[00:53:44.910]Monte Schatz: Again, I'm not going to go into all the steps here because of time and complexity limitations, but the third document in the one that I think is perhaps the most key is, is the use of trust in estate planning.
[00:53:58.290]Monte Schatz: We generally go with revocable trust. It allows the most flexibility and allows the farm.
[00:54:04.950]Monte Schatz: Owner to whether that's an individual or a core a corporate entity to retain control and and make decisions on that during their life. They are their own trustee. So they do that, then at death.
[00:54:19.230]Monte Schatz: Of either if it's a mother, a husband and a wife farm operation at the depth of the second of them. Typically that's when you have a
[00:54:27.660]Monte Schatz: Third party trustee come in and take over and manage the assets for a death settlement and so forth. Your vocal Life Insurance Trust that becomes particularly important when we get into a state taxes. And one thing I just want to
[00:54:42.450]Monte Schatz: dovetail off on briefly.
[00:54:46.950]Monte Schatz: We're looking at our mortality, we can't forget the estate tax ramifications. Now, right now.
[00:54:52.860]Monte Schatz: Each person United States has an $11.4 million exemption. Now I'm sure many of you that I'm talking to on this phone.
[00:55:00.600]Monte Schatz: And if you have a husband and a wife, you essentially double that number two little over $23 million. Now, the thing that I want to emphasize to people about this when we get into death taxes estate taxes and so forth, federal and state taxes is don't fall asleep on the wheel on this.
[00:55:21.120]Monte Schatz: I always love it when Congress uses the term, permanent estate tax reform. There is no such thing as permanent it's permanent until it sunsets, which the current legislation.
[00:55:32.970]Monte Schatz: It continues to increase that exemption amount until 2026 but then it's sunsets and goes back to the $5 million exemption. Then if Congress doesn't take action.
[00:55:44.400]Monte Schatz: Now we are at a per currently fairly political volatile environment, we may have a change of parties in car, you know, a greater majority in Congress and perhaps a change in the Senate, and perhaps a change in the presidency.
[00:55:58.080]Monte Schatz: I'm not going to get into politics of that. But suffice it to say with changes in government will come changes in the tax structure. And I think it's highly likely
[00:56:08.340]Monte Schatz: I can't say for certain, but I think it's highly likely
[00:56:11.850]Monte Schatz: That don't fall asleep, thinking that your farm may not be subject to state tax because all sudden that $11.4 million exemption today might become a 5 million or $3 million exemption, all of a sudden
[00:56:23.850]Monte Schatz: That $10 million farm, you had that was safely covered under an $11.4 million exemption now has about 6 million of it exposed. So
[00:56:33.150]Monte Schatz: can't fall asleep and I got to stay current on that and
[00:56:36.030]Monte Schatz: And any attorney you have should be proactive and communicating that to you I we recommend as a matter of course our clients come in every two to three years we send out a notice them to come in and visit with us and see if they need to do a state.
[00:56:48.780]Monte Schatz: A state updates last trust I talk about there's charitable split interest trust that's charitable remainder trust charitable lead trust if you have, if you're charitably inclined and where I see this more often than not, is frankly
[00:57:05.040]Monte Schatz: Farmers that may not have a second generation to pass it to, they might made leave a portion of their assets are all of it into
[00:57:12.570]Monte Schatz: A charitable trust and there's great income and income tax benefits as well as a state and inheritance tax deductions available doing that again too lengthy to go into a more global overview like this. So,
[00:57:27.600]Monte Schatz: That those there's some of the documents. The other one is if you got you. If you were hit with coven and you can't continue to run the operation.
[00:57:37.050]Monte Schatz: Or you're in a position where you might be in a coal mine. I, I hate to sound like the Grim Reaper, but these situations have unfolded with Coca Cola as well in everyday.
[00:57:47.640]Monte Schatz: Non Kobe type of up of a dance. Make sure you have a health care power of attorney in place to make the decision.
[00:57:54.360]Monte Schatz: And usually, our health care power of attorney is also incorporate into life decisions if you're in an artificially sustained state of being kept alive. You should have provisions in there that provide for
[00:58:08.400]Monte Schatz: End of life decisions. It's a crass way to put put it, but frankly, I call them the pull the plug provisions, at what point do you do
[00:58:17.370]Monte Schatz: I give you the healthcare decision maker, the authority to turn off the artificial equipment and let my life and and that's a critical thing, because if it goes on and there's an insurance or that could negatively impact the business.
[00:58:31.260]Monte Schatz: Aside from the obvious emotional impact that it has. And then the financial power of attorney.
[00:58:37.800]Monte Schatz: Especially when you're talking about foreign service agencies and so forth. If the person who's the decision maker is no longer mentally or physically able to make those decisions.
[00:58:47.880]Monte Schatz: You don't want to have to have a delay in succession, there should be provisions using a financial power of attorney or in the case of a corporation.
[00:58:56.280]Monte Schatz: Provisions and corporate documents that allow for succession of decision makers of interest. So there's fluidity.
[00:59:03.780]Monte Schatz: The other thing that you need to look at in the estate plan is life insurance, and that's the liquidity issue whether it's used to pay taxes or to equalize benefits to nonfarm errors or provide
[00:59:18.720]Monte Schatz: liquidity to the son or daughter that stays on the farm to buy out the interest of the non farm areas. That's one way you can possibly
[00:59:27.510]Monte Schatz: Be fair and equalize so it's important but there needs to be tax planning that goes with that to look at retirement plans tax deferred
[00:59:37.110]Monte Schatz: Strategies and so forth. Make sure that ties in with that centralized document of the trust.
[00:59:42.300]Monte Schatz: And then you also have to look at your beneficiary designation accounts. One of the things that you don't you want to make sure you do is if you set up an estate plan.
[00:59:51.390]Monte Schatz: That you don't have a bunch of joint tenancy and payable on death accounts.
[00:59:56.580]Monte Schatz: Which unduly wait more to one air or the other, which wasn't consistent with your in Canton equalizing so you always got to look and consider make those considerations as well too.
[01:00:07.650]Monte Schatz: I see we're writing a pretty long time. Just a quick thing the PPP program was extended through August 8 and, of course, Congress is working on it. And I use the word working loosely in these environments. These days, but
[01:00:24.000]Monte Schatz: They are working on extending the P P program. And these are just a few of the provisions and I don't want to go into a whole bunch of details. Suffice it to say,
[01:00:36.120]Monte Schatz: There are limitations and many meet. They may have experienced it. But I think the single biggest piece of advice I can have for you is, is work with your local banker on your PPP loans are probably your greatest resource.
[01:00:50.160]Monte Schatz: We have done a thorough analysis on the PPP program of what qualifies, and what doesn't qualify. There has to be a certain level of income for farmers to qualify, and it has to be used primarily for payroll costs so
[01:01:05.610]Monte Schatz: I'll just leave it at that, because we're running short on time on and allow some time for question and answer right now some of the proposals these final two slides are not finalized legislation, it looks like that will end up in the second round of
[01:01:25.620]Monte Schatz: The secure act provisions in the PPP program. The Farm Credit System is going to have more provisions and have more fun set aside for them. So if you don't go to your local
[01:01:38.700]Monte Schatz: You know, bank for your pee pee pee program. The Farm Credit credit system will have more robust access to resources and so forth. There was a
[01:01:48.360]Monte Schatz: There was a calculation of a maximum loan amount for farmers and ranchers and
[01:01:54.330]Monte Schatz: Basically what this legislation did is, it's nothing new. It just clarifies that farmers that are sole proprietors can use their schedule app, which is your deductions.
[01:02:05.070]Monte Schatz: Your expenses, a sole proprietor and determination of maximum loan amount and so forth. And then the last two items is that there was a provision that was requiring
[01:02:18.420]Monte Schatz: A five year net operating loss carry back and this was, this is supposed to be in the next round clarified that it only has to go back two years.
[01:02:28.680]Monte Schatz: And so it's supposed to be consistent right now the way it looks, it looks like the funding for the agricultural sector that will be allocated for the egg sector sector is they're projecting at 20 billion. So that will be used predominantly for the pee pee pee program.
[01:02:46.680]Monte Schatz: Just one last thing I wanted to reiterate, because it's just really jumped out at me.
[01:02:52.890]Monte Schatz: Because I see this in reality, you know, Ellen talked about, I guess I would call it, don't, don't be penny wise and pound foolish.
[01:03:01.650]Monte Schatz: And I know this is going to sound a little bit like, well, let's let's let's make a
[01:03:07.860]Monte Schatz: Let's make a pitch for paying attorneys fees, but I will tell you, you are so much better off on on pain.
[01:03:16.140]Monte Schatz: Utilizing expenses and, more importantly, taking the time and communication to doing your state plan now. Don't wait until the crisis unfold. I will tell you right now.
[01:03:27.540]Monte Schatz: A very real world case I have. I had a farm. I have a state litigation right now that involves a farm with about 5 million and assets in it.
[01:03:37.440]Monte Schatz: And the farmer hand rolled his own holographic well. Now it wasn't too bad. I mean in terms of how he had had done it.
[01:03:47.940]Monte Schatz: But how he attempted to amend it to cut out a couple of kids was scratch out things now.
[01:03:53.700]Monte Schatz: He did this on a on a flight to Las Vegas when he did this and long and short of it is he, he did it because he was short on time and he didn't want to pay the attorneys fees.
[01:04:04.170]Monte Schatz: I can tell you the type of will. He was looking at, I would have enhanced and so forth, would have maybe cost him $1,000 right now because the
[01:04:14.280]Monte Schatz: Two of his daughters are contesting the estate, we are up to $120,000 in attorneys fees and running and we're not even close to settling it. So, again, to go back to my initial analogy of the casino.
[01:04:26.400]Monte Schatz: Be the house be the casino. Don't be the gambler. So that concludes my piece of it now and
[01:04:34.200]Monte Schatz: I hope I provided to you some information that's useful. The biggest thing I can tell you is fine, an attorney that's willing to work with a whole team of advisors for you, your account and so forth.
[01:04:45.390]Monte Schatz: And find and and be insistent. Hopefully you don't have to pull it out and drag it out of them. But being system that your attorney clarify things for you and and put it in plain language. So, so it's an effective a state plan that works in practice, not just on paper. Thank you.
[01:05:26.310]Ryan Evans: Hey Alan you're muted right now.
[01:05:41.430]Allan Vyhnalek: Okay, so do I. Okay, so let me try to share the screen here. I think I'm going to screen share this
[01:05:55.320]Allan Vyhnalek: See if I've got that right. Okay, now
[01:05:58.770]Allan Vyhnalek: If you have any questions please type them into the chat box. We'd love to have answer some questions around. I'm not seeing any coming in, necessarily.
[01:06:06.090]Allan Vyhnalek: And we're going a little long. So, but we do. We did what we planned up seeing on class one o'clock to do that and answer questions as possible and know that
[01:06:17.970]Allan Vyhnalek: No to that we got to have the upcoming webinars. Well, there's a webinar every week. Maggie con, you look at the you find those from the form that you know that edu and it's it's tomorrow. It'll be tomorrow and then
[01:06:29.040]Allan Vyhnalek: And then, and then the 20th day bacon attorney for you and L for the ag econ department and I will have a
[01:06:34.830]Allan Vyhnalek: More in depth conversation about the power of three, those kinds of things. And then the 27th. I will give you more in depth succession primer.
[01:06:41.730]Allan Vyhnalek: A few of the points I made today, but in more detail on add a bunch of different information. So there'll be additional information on at that time. So those things are all happening. And that's that form that you nailed it. You a website and so money. What, what, what, in terms of
[01:07:00.660]Allan Vyhnalek: We're seeing plans go awry. What's the biggest issue there what tends to win for for farm families. What tends to be the biggest mistake they tend to make when you have something wrong with an estate plan.
[01:07:14.760]Monte Schatz: I would say the single biggest mistake in the obvious one before you get into the estate plan is delaying or
[01:07:27.960]Monte Schatz: Everybody likes things to be as simple as possible frequently clients will say I just want to be simple and I, and I'll even share this in the terms of but it's equally as applicable in an in a pharmacy plan.
[01:07:40.500]Monte Schatz: I have a client that has a $10 million state huge amount in a in a tax deferred account and he wants to my minimises income tax and I
[01:07:49.560]Monte Schatz: I have the tools to do that. And he's very charitable inclined, but he he staying stuck on, I want it to be simple. Well, my goal is to make it as simple as possible, but I can't. Minimize taxes facilitate transfer of
[01:08:06.960]Monte Schatz: Assets from Generation one to the next generation. In a lot of cases drafting the most simple estate plan. I'm going to have to use a little bit more sophisticated techniques. So trying to over simplify it. And the other thing is, is
[01:08:27.030]Monte Schatz: Now is not the time to hedge on any information you have. Don't underestimate the value of your assets. And I know that's a constantly moving target. You know, when we're dealing with foreign land and farm assets and so forth.
[01:08:40.650]Monte Schatz: As is the case in many other industries, but but don't hedge on if you have something if you have some embarrassing thing in your family that that you deem embarrassing. You know why I want to have a portion is for the farm, but my son has huge health all problems, Mike.
[01:08:59.010]Monte Schatz: I want to have, you know, 25% of the farm. Go to my, you know, daughter, she's a nurse and you know she's a nurse and as left the farm, but she's in an unstable marriage.
[01:09:10.920]Monte Schatz: Now's the time to be as transparent as possible because I can assure you, any estate planning attorney that's been in this business any amount of time.
[01:09:19.320]Monte Schatz: I can tell you I could write soap opera scripts for the major television networks i i don't think i find a thing that surprises me anymore. So being transparent.
[01:09:31.230]Monte Schatz: And not making the process unduly complex, but don't under simplify it. And that goes back to my obvious extreme example of
[01:09:43.140]Monte Schatz: The farmer. I had who tried to pass a 45 nearly $5 million, a state with a handwritten will
[01:09:49.620]Monte Schatz: You know, that was okay for a temporary filler, but he very deliberately I understand from his widow just did not want to go in and pay for a well and and and I look at the
[01:10:01.290]Monte Schatz: You know, part of my choice of words, but I'm looking at the emotional and financial hell. His, His widow's going through now just because of that lack of being preempt of, you know, get on it.
[01:10:13.410]Monte Schatz: You know, be transparent and now's the time for full disclosure
[01:10:18.780]Allan Vyhnalek: So we do have a couple of questions that came into the chat box. Thank you. By the way, thank you. But we have a couple of chat questions that came in the chat box and, oh, there's one even over the Q AMP. A I went to ask a question.
[01:10:32.610]Allan Vyhnalek: Well go ahead and ask, ask the question. Go ahead and type that in will be glad to be glad to help you there.
[01:10:38.220]Allan Vyhnalek: And it says, How do you encourage farmers to take the next step and transition planning. I have several
[01:10:43.770]Allan Vyhnalek: They want to start planning, but after six hours of education. So I'm ready to start creating their plan. I'll start. You can help me with that money but
[01:10:52.140]Allan Vyhnalek: What they're stuffing is that circle been actions I described, and I did a workshop in Columbus for five years in a row and for either find your there's
[01:11:04.170]Allan Vyhnalek: A couple farm couple that I knew. Come to that same workshop every year. And every year. They said, oh, we learned something new every time we just have to come back and
[01:11:13.980]Allan Vyhnalek: So it gets to be if they do get stuck in a circle. And actually, where they refuse to do anything because they're just afraid they're going to do a wrong.
[01:11:21.720]Allan Vyhnalek: Or afraid to make a bad decision as to the waiting for that perfect time to make a decision and I say there is no perfect time to get to sit and you got to make a plan and things changing you change the plan like money described, do you have anything to add to that one.
[01:11:35.940]Monte Schatz: Yeah, you know what, I add to that Ellen is is a couple things.
[01:11:42.930]Monte Schatz: You know, when it comes to starting this process any any lay person who's coming or a prospective client that comes to me.
[01:11:51.540]Monte Schatz: What I tell them is
[01:11:52.920]Monte Schatz: Perfection is the enemy of good when I send out that intake form. If you don't know how to fill it out, don't worry about it, leave it blank, we're going to have our first face to face meeting. This is the starting point. It's a process. It's not an event.
[01:12:06.360]Monte Schatz: And don't don't get stuck on having every detail to the umpteenth degree that's going to be on me. Once I have the final documents.
[01:12:13.920]Monte Schatz: Give me as good and comprehensive information use ask them, it's, you know, don't get stuck on my my farm land is $8,036 per acre. You know, if it's 8000 an acre or between eight 9000 that's fine. That, that gives me the starting point.
[01:12:31.920]Monte Schatz: So don't let perfection and doing this be the enemy good and don't ever underestimate your own knowledge in this thing.
[01:12:40.770]Monte Schatz: As an attorney, I'm, I'm a facilitator. Yeah, I got a draft and look at some complex techniques and perhaps some
[01:12:47.610]Monte Schatz: Some complex drafting, but you are the most invaluable you the client or the most invaluable resource on this and you know your business better than anybody else does.
[01:12:56.580]Monte Schatz: And don't, don't be, you know, don't be fretful if you don't know the legal concepts I any more. If you don't understand legal concepts, it'd be no different than if I came back to you and said, gee,
[01:13:11.490]Monte Schatz: You know, I don't, you know, I'm going to try to be an expert on how to do GPS tracking on your comment. I mean, I grew up in the area of writing a 40 Ken on air conditioning cat trapped or I mean farming today is so much more complex.
[01:13:26.850]Monte Schatz: I'm not an expert in that I'm going to rely on you. Similarly, when you come to me. Don't worry about being the expert i'll i'll fine tune the point should bring to the table.
[01:13:36.810]Allan Vyhnalek: So your cab. Mine didn't even have a cab. I had to sit out there in the wild. So now I'm kidding you.
[01:13:44.400]Monte Schatz: See I'm wearing hearing aids. I got 4010 hearing loss because the cozy cabin.
[01:13:49.350]Allan Vyhnalek: Here's your here's your well yeah I was worse in there. There was another question that came in, it said it said could you could the property tax changes being discussed state legislature have an impact on succession planning.
[01:14:03.930]Allan Vyhnalek: I was sensitive won't, but I don't know that money you have any comment to that.
[01:14:08.070]Monte Schatz: Well it you know where where my in terms of succession. I don't think it'll, it'll have much impact. Keep in mind, as I'm sure the questioner. The person sending the question understands this, you know,
[01:14:22.380]Monte Schatz: The fact that there may be a change in the assessment process and how a gland and other type of property is valued. You got to kind of look at that.
[01:14:31.410]Monte Schatz: On a standalone basis because when you get into succession planning particularly how it ties into establishing cost basis on property well
[01:14:43.140]Monte Schatz: And valuation for death taxes, you're ultimately going to look at the fair market value the assessed value and you're going to have any impact on that. So I don't see changes in that
[01:14:55.800]Monte Schatz: In how property is assessed for for property tax purposes, having a huge impact on on it's business as usual, as far as how you do succession planning and so forth. So shouldn't have shouldn't change the apple log rhythm of decision making.
[01:15:11.970]Monte Schatz: And document drafting
[01:15:19.560]Allan Vyhnalek: About I'm not seeing anything about changing the way that we're going to do the evaluation. So I would agree with that. I think we're there anything like that going on.
[01:15:29.760]Allan Vyhnalek: Um, I think that's all we got. And I think we probably barely people get get back to work and I, be it instills one final thing here. Where am I at here.
[01:15:47.460]Monte Schatz: One thing I'd like to share Ellen. It's a little bit of a colloquial story but
[01:15:54.000]Monte Schatz: The other thing is, is, don't, don't be reluctant if you, you know, to come in and you know you're 56 years old and say,
[01:16:01.680]Monte Schatz: My gosh, I don't even have my state plan in place or last time I did my estate plan my children were newborns and that you know there are now in their 30s. I'm going to share a statistic with you, which I hope it enhanced but 30 years ago. Not long after I was out of law school.
[01:16:21.690]Monte Schatz: I grew up in South Dakota and the South Dakota Bar Association released a statistic that was shocking to me and and it's the classic The Carpenters home gets fixed last story and that is back about 30 years ago they did a survey.
[01:16:38.040]Monte Schatz: And 70% of attorneys in South Dakota died without a will.
[01:16:45.900]Monte Schatz: You don't want to be one. So don't
[01:16:50.010]Monte Schatz: Do, as we say, not as we do. And I think that has improved in recent years, but what the reason I share that. Is it really illustrates the concept that
[01:17:00.510]Monte Schatz: That people get busy and estate plans are easy to put off delay and so forth. You get busy attorneys prayer specials and private law firms. We run a business to on top of
[01:17:13.830]Monte Schatz: Serving clients. And so we get busy, but don't, don't be reluctant to start the process that the best step is getting the first step and
[01:17:21.510]Monte Schatz: And for those that, like I said, the illustration, you gave Allen, where they make the this couple came back every year. And they're going to get their estate planning started
[01:17:31.410]Monte Schatz: I think it's a little bit incumbent on the attorney. I mean, I know I set up ticklers I haven't heard from my clients. It's like, Hey, were you out on the intake form it don't
[01:17:42.180]Monte Schatz: Don't worry about it. If you
[01:17:43.800]Monte Schatz: If you can fill in all the blanks. Come on in. We'll fill in the blanks for you. That's this is just to start the dialogue and that's critical. Just, just get started.
[01:17:54.000]Allan Vyhnalek: Yeah, I think that's exactly right and and
[01:17:57.300]Allan Vyhnalek: You have to make sure you work with an attorney to get understand is that attorneys can be confusing you they'll go five different attorneys until the attorney on to explain to you in plain English, too. I think for the day, we probably should say that we're done.
[01:18:12.300]Allan Vyhnalek: Okay, we appreciate the comments that people enjoyed it. The chat in the chat people enjoy the program and great information to you pushed me over the edge to get something done, who for you if you do
[01:18:23.790]Allan Vyhnalek: If you need help make sure you get a whole new york make sure we get you hooked up with Monty and
[01:18:29.040]Allan Vyhnalek: Or whoever you want to work with and make sure you keep going at this your local attorney or wherever you're at. Ryan, do you stop the recording for now and thanks everyone for being on with a nice crowd.
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