Succession and Estate Planning for Farm and Ranch - Part 2

Department of Agricultural Economics Author

03/05/2021 Added

321 Plays

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With: Allan Vyhnalek, Nebraska Extension Educator for Farm and Ranch Succession, and Brandon Dirkschneider, Certified Farm Transition Specialist and Managing Principal at Insurance Design Management in Omaha The second session of the two-part series on succession and estate planning will feature a discussion about specific tools that can be used in the processes of estate and succession planning for farmers and ranchers.

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[00:00:00.000]Allan Vyhnalek: Everyone I think there's still some some people trying to join in, but we're going to go ahead and get started on time, so we give brandon as much time as we can.
[00:00:09.000]Allan Vyhnalek: Welcome back to the webinar the ag ECON webinar series, and you want to watch them on your screen right now that's the that's the region to be happening and also know that.
[00:00:20.910]Allan Vyhnalek: was very please come back with the number two today that's very helpful and now and, and I can i'm hosting today and.
[00:00:28.950]Allan Vyhnalek: If you have questions as we go along brandon i'm sure will generate some questions, make sure you jump into the chat or you can do in Q amp a, but I think I prefer the chat and i'll make sure the brand and gets to see them and and answers those questions again.
[00:00:44.730]Allan Vyhnalek: I think here's the announcements listen a couple of meltdowns on me one we'd like to point out to nebraska response hotline or means a great resource for April professionals across the state.
[00:00:55.950]Allan Vyhnalek: Providing mental health counseling information regarding a regarding legal assistance financial clinics mediation and more the hotlines toll free number is 800-464-0258.
[00:01:07.530]Allan Vyhnalek: It is a wealth of resources related to stress and and we also have a wealth of resources related to stress and wellness at rural wellness.yunel.edu.
[00:01:18.270]Allan Vyhnalek: Okay, the other pitch, I want to make is to reiterate what I said last week about the land link program the landing program just started just barely a month ago we're trying to link.
[00:01:28.860]Allan Vyhnalek: Land seekers who are looking for an opportunity to start working some land or start working some some a maybe a either a farm or ranch and with landowners they're looking for help, they don't have this or that next generation come back and those landowners wants to keep.
[00:01:46.110]Allan Vyhnalek: Their farm or ranch intact, is its own operation, so you go to that just go to farm that you, and now you look for my blank.
[00:01:54.240]Allan Vyhnalek: is either, so it says its own link, or it will be a link under the real estate management tab and we'd love to add any questions about that make sure you let me know so today we're having a brain understand our guest.
[00:02:10.170]Allan Vyhnalek: speaker on this webinar a brandon has a nice background in.
[00:02:16.440]Allan Vyhnalek: financial planning, but more importantly he's taken to certified farm transition network training to be a farm transition network counselor or trying, you know advisor.
[00:02:28.560]Allan Vyhnalek: And he assists me and we both serve on the national park transition network board of directors so that's how I know brandon a little bit better, but more importantly brandon comes from private industry and doesn't necessarily.
[00:02:41.640]Allan Vyhnalek: What I appreciate is in this or promote his industry or his work.
[00:02:45.240]Allan Vyhnalek: he's trying to provide education to the to nebraska and so that's what I appreciate.
[00:02:49.920]Allan Vyhnalek: And so, and so, last week I told you about communications and getting the family together and trying to decide how it's all going to play out from a family perspective.
[00:02:59.100]Allan Vyhnalek: This week brands going to talk about some of the tools, you might use to make the succession plan go together and so without any more screw around on my part, I need to turn over to brandon Dirk Schneider and brandon Thank you very much for being on on board with us today.
[00:03:13.440]Brandon Dirkschneider: Absolutely Alan Thank you very much, so good afternoon everybody.
[00:03:19.770]Brandon Dirkschneider: Welcome to a part about farm and ranch estate and succession planning, but more importantly, leaving a legacy, leaving a legacy to your next generation.
[00:03:29.580]Brandon Dirkschneider: And today we're going to talk about what that is or what that means, and so, with out further ado, and get my screen to go forward here there we go.
[00:03:40.470]Brandon Dirkschneider: So let's talk a little bit about what succession planning is and why it's so important, but succession planning is a process.
[00:03:47.550]Brandon Dirkschneider: it's not a one time event it's a process and it's a process of identifying and developing new leaders within your farm or ranch operation, who can.
[00:03:55.440]Brandon Dirkschneider: Who can replace the patriarchal matriarchal when they decide to just leave retire become disabled or eventually, as we all will do die.
[00:04:03.780]Brandon Dirkschneider: But more importantly it's a family business and what it entails is there needs to be a lot of mentoring, not only that next generation but maybe the third generation that's back.
[00:04:13.080]Brandon Dirkschneider: To potentially fill those key leadership positions and understand the operation and, most importantly, understand the reasons why in reasons why those decisions were made.
[00:04:22.980]Brandon Dirkschneider: As the operation grew or maybe at times did not grow and what was most beneficial for the operation in total so.
[00:04:31.530]Brandon Dirkschneider: First off Why is this so important, why is this topic so important to our farm families and our ranch families across the state.
[00:04:40.440]Brandon Dirkschneider: Well, the biggest statistic that I can show you is right now there's over 2 million farms that cover Americans that landscapes and yet still about 99% of those.
[00:04:50.640]Brandon Dirkschneider: 2 million farms are operated by families, but only 25% of those are 29% of those families actually have a transition plan in place.
[00:05:00.150]Brandon Dirkschneider: So when you look at over 2 million farms that's a lot of families that don't have transition plans in place.
[00:05:06.480]Brandon Dirkschneider: And, considering that our farming population is getting older and older, we know that it's a huge factor for a lot of our families to face because.
[00:05:15.750]Brandon Dirkschneider: We all know we've heard this statistic one generation to build it up one generation to maintain it and the next generation will eventually lose it.
[00:05:23.760]Brandon Dirkschneider: And that's statistically that's correct only 30% of family owned businesses pass on to the next generation and only 12% pass on the third.
[00:05:34.680]Brandon Dirkschneider: And a lot of people always think it's well why is that well, is it just because the maybe somebody says silver spoon syndrome, or the kids just didn't realize what hard work, it was.
[00:05:44.310]Brandon Dirkschneider: When in all actuality what most of the time, it is, is because there was no plan in place and with no plan in place the unseen the.
[00:05:53.220]Brandon Dirkschneider: unseen circumstances force assets to be liquidated.
[00:05:56.970]Brandon Dirkschneider: And when you liquid assets on our farm or ranch operation not only losing the asset which you lose the income associated with that so we're going to dive into a little bit about what you guys need to be looking at, but.
[00:06:08.370]Brandon Dirkschneider: You know the old adage failing to plan is planning to fail, I think most of us have all heard that, but that is absolutely true when it comes to our farm or ranch operations in the primary reasons we see these type of plans fail.
[00:06:22.620]Brandon Dirkschneider: Is because they haven't started, there is no written plan, there is no current estate plan or succession plan so after anything if you do today it's get started absolutely number one thing for you guys to protect the family operation is just simply to get started.
[00:06:39.390]Brandon Dirkschneider: The other one is inadequate, a state or succession planning not working with a team of experts are working with somebody.
[00:06:44.670]Brandon Dirkschneider: That isn't quite familiar with the areas of a state or farm succession planning and we'll go through more what that looks like.
[00:06:51.420]Brandon Dirkschneider: A lot of times it's insufficient capital or failure to mentor prepare the next generation properly or the other one it's just failure to communicate why and we'll dive into these a little bit deeper as we go along here, but what is a succession plan.
[00:07:08.640]Brandon Dirkschneider: I get that question all the time well brandon What do you mean when you say a succession plan well a succession plan involves this.
[00:07:15.810]Brandon Dirkschneider: It involves the Patriarch and matriarch or that family farm or ranch operation really diving in and establishing Okay, what are our goals and objectives.
[00:07:23.790]Brandon Dirkschneider: What do we want to see happy because if the matriarch and patriarch aren't on the same page.
[00:07:30.660]Brandon Dirkschneider: What are the likelihoods that that state plan or succession plan is going to work, so it really starts off what are the Patriarchs and matriarchs goals and objectives and then, what are the overall families goals and objectives.
[00:07:42.390]Brandon Dirkschneider: and clearly defining on that and what what and who family members are going to be involved in this process and why have we identified the appropriate successors or identify as successors able to carry on to the next generation.
[00:07:58.740]Brandon Dirkschneider: And then it's a State planning some contingency planning or risk mitigation.
[00:08:03.510]Brandon Dirkschneider: A lot of times it's an entity structure or tax planning, making sure that the financial independence of the patriarchal matriarchal are feasible without jeopardizing the farm or ranch operation.
[00:08:14.790]Brandon Dirkschneider: into the next generation business valuation or determining how devalue assets, especially when it comes down to a state planning we'll talk more about that.
[00:08:23.400]Brandon Dirkschneider: Implementing the exit strategy for that patriarchal matriarchal the farm family.
[00:08:27.540]Brandon Dirkschneider: And then, most importantly, it's just the implementation and the follow up and I can't stress follow up enough, because we all know that family dynamics change.
[00:08:37.530]Brandon Dirkschneider: And when they change more than likely our plan changes so we're going to dive in a lot of these areas deeper this afternoon and hopefully it promotes a lot of questions for you guys but.
[00:08:51.600]Brandon Dirkschneider: My big question that I always ask is who has a transition plan plan in place today.
[00:08:57.180]Brandon Dirkschneider: The previous statistics that only 29% actually have a transition plan in place when in all actuality we all have a transition plan in place.
[00:09:05.640]Brandon Dirkschneider: The statistic earlier what said 29% of us have a transition plan in place 29% of our families have a transition plan in place that they want.
[00:09:14.910]Brandon Dirkschneider: When all actuality if you die in the state of nebraska it's called dying and test date, and then the state of nebraska has a plan for you.
[00:09:22.710]Brandon Dirkschneider: Okay, so we all have a plan it's either the plan we want or it's the plan that the state of nebraska will put down because we didn't take the time to put.
[00:09:30.210]Brandon Dirkschneider: A will together or an estate plan together a succession plan together so let's take a quick look at what that looks like if we die without a will or out without a estate planning documents in the state of nebraska.
[00:09:41.490]Brandon Dirkschneider: This is who's going to inherit the inherit your property So if you have a spouse, but no children or parents you're surviving spouse gets the entire state.
[00:09:50.940]Brandon Dirkschneider: But if you have spouse and you have children and the children are of the decisions that the decision and the spouse, the spouse gets the first hundred thousand half of the estate goes to the spouse and the other half gets left to your children split evenly.
[00:10:09.030]Brandon Dirkschneider: Okay, and we're going to talk more about this, you know even topic, you know fair isn't always equal and equal isn't always fair but split evenly whether your children are active in the operation or whether you're or whether they're inactive and the operation.
[00:10:24.420]Brandon Dirkschneider: Something else to consider if the if it's your if your spouse and some or none of the children are.
[00:10:31.410]Brandon Dirkschneider: From your current marriage or your current spouse that half of the estate goes to your spouse and half split amongst your children.
[00:10:39.690]Brandon Dirkschneider: Okay, so it's very important when you're looking at the operation and trying to see what's feasible to make sure that my active children in the operation can continue this but I maybe I want to treat my non active children fairly it may not be even.
[00:10:53.310]Brandon Dirkschneider: Maybe the nice thing is is you guys get that choice, and you can put that you can make those decisions okay.
[00:11:01.470]Brandon Dirkschneider: I always like adding this picture, because if I always hear way too often well why do I care i'll be dead and gone.
[00:11:10.470]Brandon Dirkschneider: Well, most of the time, if you still want your family to be a family, after the death of the Patriarch or matriarch or both.
[00:11:18.420]Brandon Dirkschneider: You need to be sure that you have a plan in place and you're communicating the why, because otherwise your next family functions probably going to look like desks, and I think that's, the last thing any of us want so let's talk about what a State planning.
[00:11:32.040]Allan Vyhnalek: goals Ryan Ryan Ryan, I mean representing line there was a question that came in.
[00:11:37.470]Allan Vyhnalek: As what you're related back to your previous slide on how'd you die without a will.
[00:11:42.630]Allan Vyhnalek: Yes, go back to that maybe.
[00:11:44.700]Allan Vyhnalek: And the questions came in that said what if there's no spouse no parents, but there are siblings.
[00:11:52.710]Brandon Dirkschneider: And so there's no children there's no spouse and there's no parents.
[00:11:59.370]Allan Vyhnalek: But there are kids.
[00:12:01.980]Brandon Dirkschneider: Salter so it would be, it would be split between so if children, but no spouse.
[00:12:06.630]Brandon Dirkschneider: right here you're seeing the entire split the entire state of split evenly among the children.
[00:12:12.900]Right.
[00:12:14.310]Allan Vyhnalek: What happens to the inheritance if there's no spouse and no children.
[00:12:20.310]Brandon Dirkschneider: If there's no spouse and no children and the parents.
[00:12:27.420]Allan Vyhnalek: goes to the parents.
[00:12:29.820]Allan Vyhnalek: you're just broken right brandon you just froze.
[00:12:35.340]Brandon Dirkschneider: Can you hear me.
[00:12:36.630]Allan Vyhnalek: Now we're back.
[00:12:38.100]Brandon Dirkschneider: There we go.
[00:12:39.000]Allan Vyhnalek: We got class question again.
[00:12:41.550]Brandon Dirkschneider: So if there is no spouse and there's no parents or if there's no spouse and there's no children.
[00:12:48.390]Brandon Dirkschneider: It would go to the parents if there's no parents, then it would go to their siblings.
[00:12:58.320]Allan Vyhnalek: Please go ahead i'm.
[00:13:00.480]Allan Vyhnalek: sorry to interrupt but that you need to be handled right Stan otherwise put that down is confusing.
[00:13:06.480]Brandon Dirkschneider: yeah no that's perfect all right okay.
[00:13:09.900]Brandon Dirkschneider: So some estate planning goals.
[00:13:12.450]Brandon Dirkschneider: that we need to consider while you're living okay first is you got to figure out who's going to manage your assets in the event that you're ever disabled during the past.
[00:13:23.670]Brandon Dirkschneider: And you do this by establishing what's called a power of attorney but a power of attorney will.
[00:13:29.250]Brandon Dirkschneider: Be naming someone or individuals that are going to be responsible in the event that you're disabled in any capacity that you can't make those decisions for yourself.
[00:13:39.000]Brandon Dirkschneider: In nebraska your surviving spouse can have that decision automatically over there, their spouse, but if there is no spouse and you're incapacitated or disabled.
[00:13:49.140]Brandon Dirkschneider: That power of attorney names that individual because if you don't have this power of attorney, then you have to go through a court supervised process and get somebody named.
[00:13:57.480]Brandon Dirkschneider: For you, so the power of attorney to name somebody who's going to manage those farm assets or or ranch assets or how it's going to be managed, or when the market grain or when to sell cattle is very important.
[00:14:09.510]Brandon Dirkschneider: Okay, the other aspect is is a power of attorney for health care decisions.
[00:14:14.550]Brandon Dirkschneider: If i'm disabled or incapacitated and I can't make decisions for myself and I don't have a spouse that's currently alive, who am I going to need to make healthcare decisions on my on my.
[00:14:24.960]Brandon Dirkschneider: For myself, so power of attorneys is a very important document, not only for the overall financial management of the operation, but my overall health care and who's going to make those decisions.
[00:14:37.530]Brandon Dirkschneider: The other thing, while doing is protecting assets from long term care costs it's one of the number one things that some of our smaller family farms and ranches operations are looking at.
[00:14:48.270]Brandon Dirkschneider: From a risk mitigation standpoint, because we all know how expensive nursing home or assisted livings are.
[00:14:53.730]Brandon Dirkschneider: And we also know that long term care insurance can be very expensive to so what ways and what things should we look at for protecting our assets of the farm assets from the from a nursing home or long term care costs.
[00:15:05.280]Brandon Dirkschneider: Now, in the state of nebraska currently you can do what's called a life of state, and you can put assets into that life and state to where.
[00:15:13.710]Brandon Dirkschneider: You, the Patriarch or matriarch or the surviving patriarch from a chart can get the income off the asset but legally you don't you don't own the asset anymore Okay, so when you don't own that asset anymore.
[00:15:27.210]Brandon Dirkschneider: You have no right to say.
[00:15:29.790]Brandon Dirkschneider: Who gets it or where it goes you set that up at the beginning of the of the LIFE estate, so you may say okay.
[00:15:35.730]Brandon Dirkschneider: The remainder interest or the value or the acres that I put into this life estate is going to go to.
[00:15:41.700]Brandon Dirkschneider: Little Johnny little susie or split equally between the two of them i'm just getting the income off of it so there's other ways and decisions, while you're alive, that you can make some estate planning decisions.
[00:15:54.630]Brandon Dirkschneider: Without doubt, that are taking place okay other estate planning goals at def include.
[00:16:04.050]Brandon Dirkschneider: determine who gets what how and when, after death, again we here to way too many times i'll be dead on who cares well I love alan's.
[00:16:14.940]Brandon Dirkschneider: comment that he had that he uses everyone to allow what about grandma pie plate, do you really want everybody fighting over grandma's pie plate, or is it just simply said, you know what.
[00:16:25.170]Brandon Dirkschneider: we're going to divide the assets here's what it's going to look like, and this is why, because when mom and dad give them the why the kids usually aren't sitting there arguing.
[00:16:34.770]Brandon Dirkschneider: But if mom and dad don't tell them why or don't do this process, you know, then that's where the family or siblings and start fighting.
[00:16:42.840]Brandon Dirkschneider: Okay, other things and strategies is we really, especially with the appreciation and land values and we'll talk about the federal estate tax, but we need to make sure that we're looking at ways of reducing expenses and avoiding delays.
[00:16:53.760]Brandon Dirkschneider: While maximizing the state and minimizing the taxes, and we can do that through various other estate planning documents we'll talk about those shortly avoid family disputes and again minimize the state taxes so let's talk about some of these more state honey goals.
[00:17:09.750]Brandon Dirkschneider: So simply at the least.
[00:17:14.610]Brandon Dirkschneider: Everyone should consider a will, and what is a will will is a legal document that essentially does not take effect until the individual dies.
[00:17:24.720]Brandon Dirkschneider: And it varies between states, but what it does, is it basically is an instruction manual on how to transfer assets and to WHO.
[00:17:34.560]Brandon Dirkschneider: If there's minor children involved, it would name guardians and it can also establish trust for certain beneficiaries, or for minor children.
[00:17:44.640]Brandon Dirkschneider: Okay, what else does that will involve well a will will involve the probate process because.
[00:17:51.210]Brandon Dirkschneider: it's a court supervised process to make sure your executor that you named in the will is actually distributing the assets, based on being right the written instructions within your will.
[00:18:01.200]Brandon Dirkschneider: Okay, and that has to be a court supervisor process, just to make sure that they're carrying.
[00:18:06.090]Brandon Dirkschneider: carrying the terms of and nobody's trying to put undue pressure on the executor and change the terms of the will.
[00:18:11.730]Brandon Dirkschneider: The other advantages of a with have a will, and the probate process is it does limit the time to challenge the world.
[00:18:19.260]Brandon Dirkschneider: So if somebody would ever come in and I kit in a child says that my sibling put mom and dad up to this, they were under duress they weren't under.
[00:18:27.330]Brandon Dirkschneider: mental well building the mental well being that it limits the time that you can challenge that will, and it also limits the time creditors can make against the make against the.
[00:18:38.370]Brandon Dirkschneider: State so at minimum having that legal written document, along with your power of attorneys is very important, just because it gives the written instructions on there through the probate court supervised process distributing those assets okay.
[00:18:55.950]Brandon Dirkschneider: Question we always get can we avoid probate yes at a State plan can always be designed to yet control the assets and who they're going to pass through but yeah avoid probate.
[00:19:06.690]Brandon Dirkschneider: And why would you want to avoid probate well, a lot of people want for stuff to remain private you doesn't want to be a court supervised process so it's not published in the paper.
[00:19:15.990]Brandon Dirkschneider: And they are they don't want you know, a charge the extra fees to have their state probated but how can we avoid probate okay well, you can own property.
[00:19:28.410]Brandon Dirkschneider: titled joint tenants with rights of survivorship so my wife and I we own our own we own our House joint tenants with rights of survivorship so.
[00:19:36.690]Brandon Dirkschneider: The first depth of either one of us it automatically passes to that certain to that to that survivor okay.
[00:19:42.900]Brandon Dirkschneider: You can complete beneficiary designation forms on property, such as iras retirement plans life insurance.
[00:19:49.500]Brandon Dirkschneider: Because those supersede your will or any estate planning documents, a named beneficiary will go out right to that person now.
[00:19:57.570]Brandon Dirkschneider: Again, if your family dynamics change and let's say wanted somebody in your family got a divorce.
[00:20:03.750]Brandon Dirkschneider: you're going to want to update those beneficiaries, because if you don't and you thought it was going to the new wife or was going to your kids but you never outdated the beneficiary.
[00:20:11.940]Brandon Dirkschneider: It might be the exponent husband or the ex wife that's getting those assets, because those do supersede your estate planning documents okay.
[00:20:19.890]Brandon Dirkschneider: You can utilize transfer on death deeds, and that when you own an asset it's just transferred on death or.
[00:20:26.760]Brandon Dirkschneider: Another way to avoid probate is making gifts during your lifetime, which may or may not make sense, depending on the size of your state and what you're trying to accomplish.
[00:20:35.190]Brandon Dirkschneider: But those are some simple ways to avoid probate the other one is using trust, and this is where a lot of questions come up because everybody has some horror stories what they.
[00:20:46.680]Brandon Dirkschneider: heard about trust, but trust her actually great tool to manage certain assets, so what is the trust well a trust is a legal entity that holds property.
[00:20:59.940]Brandon Dirkschneider: Okay, so if I have three daughters my daughters are 1916 and 12 So yes, we're having a lot of fun in my household right now.
[00:21:07.890]Brandon Dirkschneider: If I took certain assets and I put them into the trust i'm the grand tour because i'm the individual that took the assets and place it in the trust okay.
[00:21:18.330]Brandon Dirkschneider: Now i'm the grand tour so as long as i'm alive, I can make changes to that trust, as long as it's a revocable trust okay and we'll talk a little bit more about that so as long as i'm alive, I can make amendments and changes and everything I want to that trust document all right.
[00:21:36.750]Brandon Dirkschneider: Now, at my death that trust becomes irrevocable nobody can change it, nobody can change the terms of it and then whoever I named us trust D.
[00:21:46.710]Brandon Dirkschneider: manages the property according to the trust document of the of the assets and that trust.
[00:21:53.790]Brandon Dirkschneider: OK, so my three daughters would be the beneficiaries of the trust in any assets that are in there that are generating an income stream the trust could continue to own.
[00:22:01.980]Brandon Dirkschneider: And the income out of that trust is paid out to my three daughters now why would I do something like this, well, I want to control man is the asset, because if I die today, while they're young I want.
[00:22:15.210]Brandon Dirkschneider: Where they're not maybe knowledgeable or experienced enough to manage those assets, so I want the trust to manage those assets and I name a trustee to help control that.
[00:22:25.380]Brandon Dirkschneider: Up until a certain point in time, where I think, maybe they're feasible, that they can manage those assets.
[00:22:30.780]Brandon Dirkschneider: And in my particular trust that doesn't assets aren't rolled out until they're 3540 and 45 well why is that well the reason that is is because if they ever get divorced, or if they ever make some.
[00:22:45.660]Brandon Dirkschneider: Fight bad financial decisions or they get in a lawsuit they don't own the assets so it's never going to be a part of a divorce proceedings of a lawsuit or a bankruptcy, because they don't own the asset so i'm protecting the assets for their benefit long term.
[00:23:02.400]Brandon Dirkschneider: Okay, so it's a great tool just depending again on what your goals and objectives are okay.
[00:23:10.950]Brandon Dirkschneider: So let's talk about the pros and cons of a revocable trust the pros are you avoid probate.
[00:23:17.130]Brandon Dirkschneider: We see a lot of attorneys that still charge 1% on a on an estate to probate in a state that's really expensive today today's most attorneys shooters charge a flat fee.
[00:23:27.300]Brandon Dirkschneider: It provides the capacity for planning and asset management protects your privacy and it just reduces the administrative burden on your loved ones.
[00:23:36.090]Brandon Dirkschneider: Because you're making choices in your head deciding how those assets are managing dispersed without them, trying to say on wish I would have known what data would have done.
[00:23:44.460]Brandon Dirkschneider: It Okay, so you are basically controlling assets from the grave there can be a lot of good things about that.
[00:23:50.610]Brandon Dirkschneider: The cons about using trust they are more complex, they are more detailed there's more work up front and there is a higher initial cost for establishing trust than a will.
[00:24:00.420]Brandon Dirkschneider: But long term your family's going to save money, with the trust, rather than going through that probate process so Those are some of the pros and cons associated with using trust okay.
[00:24:15.930]Brandon Dirkschneider: Any questions Alan did you see so far, before I move on some tax basics.
[00:24:21.630]Allan Vyhnalek: Nothing came in on us, or what you just covered so please keep going thanks.
[00:24:26.760]Brandon Dirkschneider: Alright perfect.
[00:24:27.990]Brandon Dirkschneider: So let's talk a little bit about taxes associated with succession planning.
[00:24:31.590]Brandon Dirkschneider: Okay, one of the things we talked about insufficient liquidity or insufficient planning.
[00:24:37.320]Brandon Dirkschneider: Is when you're looking at taxes, especially like the federal estate tax I call it a voluntary tax and the reason I call it a voluntary tax and because there's a lot of tools that you can implement.
[00:24:46.590]Brandon Dirkschneider: To get around that so it's a voluntary tax if you fail to the plan you're going to pay the tax, so the federal gift tax the federal estate tax here's the differences, a federal gift tax our.
[00:24:58.590]Brandon Dirkschneider: taxes imposed during your lifetime, as you make gifts now.
[00:25:03.300]Brandon Dirkschneider: there's ways around that we'll talk about that here a little later, but the federal state tax our transfers to different people.
[00:25:10.020]Brandon Dirkschneider: That are made after your death, so the federal gift tax taxes that are paid when, during your life for assets assets that you've given away federal state taxes or taxes that are due on assets that are transferred to somebody at your doubt.
[00:25:23.850]Brandon Dirkschneider: Okay, the other part, that comes into a state planning in a succession planning is federal the Federation federal again generation skipping tax, which is a tax impose if you skip a generation, so I you're giving acids to your grandchildren there's pros and cons of so.
[00:25:42.480]Brandon Dirkschneider: With this, this is the more complicated stuff we're not going to dive into the gst tax today, but I wanted wants you to be out there.
[00:25:49.830]Brandon Dirkschneider: And everybody also needs to know that nebraska also has an inheritance tax which it's not huge if it's left to your siblings or if it's left to.
[00:25:59.700]Brandon Dirkschneider: or not to your siblings i'm sorry your children it's 1% on anything over 40,000 where it gets a little bit bigger if it's left to another.
[00:26:08.070]Brandon Dirkschneider: Remote relatives like your siblings then it's up to 30% or 80% if it's left to a non family member, so those.
[00:26:16.380]Brandon Dirkschneider: Are some of the transfer taxes, so one thing that a lot of people need to be very cognizant of and very proactive about is this federal estate tax Okay, because today and I need to update these numbers, I apologize that but.
[00:26:31.590]Brandon Dirkschneider: Last year, the Federal State tax was $11.58 million per person so realistically a husband and wife could could give.
[00:26:42.510]Brandon Dirkschneider: Somebody $23 million, without ever paying a federal estate tax or a federal gift tax, so you could give that $23 million away during your lifetime.
[00:26:52.800]Brandon Dirkschneider: Or at your death assets transferring down to the next generation, if there were $23 million or less you don't incur a federal gift tax well that federal.
[00:27:02.880]Brandon Dirkschneider: gift tax for that federal estate tax is starts at 40% so any dollar above that is tax at a 40% level, so why is that so important well it's important because on January 1 2026.
[00:27:17.550]Brandon Dirkschneider: If Congress and Senate doesn't act they don't do anything it's going to revert back to a $5 million exemption, it will be adjusted for inflation but what's going to happen.
[00:27:28.770]Brandon Dirkschneider: it's going to be maybe around six six and a half, maybe $7 million so now all of a sudden, instead of being able to pass $23 million, a state tax free to the next generation now, we can only pass maybe 12 to 14 million.
[00:27:44.520]Brandon Dirkschneider: So if we can pass 14 million after January 1 of 2026.
[00:27:50.040]Brandon Dirkschneider: But today we can patch past 23 million well that's a $9 million dollar difference if we don't do any planning whatsoever and it reverts back, and we do have that size of an estate you voluntarily created a $3.6 million federal estate tax bill by doing nothing.
[00:28:07.620]Brandon Dirkschneider: And that's what I mean blog a lot of times these taxes are voluntary in nature, because you're not doing the planning, so we do we're really proactive in that.
[00:28:16.920]Brandon Dirkschneider: The other portion in that is you got to pay attention to the political environment.
[00:28:20.520]Brandon Dirkschneider: and not to get on one side of the table or another, but you have to pay attention because even today they're looking at changing that federal estate tax exemption back to $3.5 million.
[00:28:31.800]Brandon Dirkschneider: not adjusted for inflation.
[00:28:33.750]Brandon Dirkschneider: Now, will that happen, we don't know, but what you have to do is, you have to be cognizant you have to be proactive or you have to hire a team that's going to be proactive planning for you, on that basis.
[00:28:43.620]Brandon Dirkschneider: Because that tax bill that could really jeopardize some of our farming and ranching operations.
[00:28:52.350]Brandon Dirkschneider: So what constitutes a taxable state, how do you how does the irs say, well, what is your taxable state.
[00:28:58.980]Brandon Dirkschneider: Well, what they do is they're going to take fair market that you not tax assessed value not anything else they're going to take fair market value of your personal property.
[00:29:08.610]Brandon Dirkschneider: Your iras 401 k's any retirement plans stocks of corporations are stocks and bonds mailing the equities market.
[00:29:15.690]Brandon Dirkschneider: they're going to take all your business assets they're going to take all your real estate your life stock your equipment.
[00:29:20.850]Brandon Dirkschneider: Your grain inventory they're going to take everything and they're going to dump it into this bucket and then they're going to allow you to subtract any nebraska inheritance tax.
[00:29:29.820]Brandon Dirkschneider: Any accounting fees any appraiser fees, because more than likely they're going to want you to take their wants you to do an appraisal, so they get their true market value.
[00:29:38.640]Brandon Dirkschneider: you'll get to deduct any probate expenses attorney fees or executor fees and after all those deductions and any liability debt if you have debt liability on there.
[00:29:48.540]Brandon Dirkschneider: That net that net amount is what constitutes your taxable a state and that's what they'll see if you're over the federal take a State tax exemption amount they'll apply the federal state tax now if you see over on the left hand side of the screen I have on their valuation factors.
[00:30:08.310]Brandon Dirkschneider: What most people don't realize is after you take that true fair market value that the irs wants.
[00:30:15.390]Brandon Dirkschneider: That actually will allow discounts on valuation factors for certain aspects, and these aspects are usually surrounding.
[00:30:24.360]Brandon Dirkschneider: limited liability companies family limited partnerships general partnerships or s corpse or things of that nature if they're structured correctly, you can actually take anywhere from 20 to 30% discount.
[00:30:36.120]Brandon Dirkschneider: On those assets for lack of control, lack of marketability or what's called a special use permit it's rough internal revenue code 2032 a okay so let's take a quick real quick example.
[00:30:50.100]Brandon Dirkschneider: If the if they do nothing to the federal estate tax does sense sunset back and let's say it sunsets back and it's somewhere around that six to $7 million.
[00:30:59.520]Brandon Dirkschneider: justin for inflation on January 1 2026 okay well if we if let's say it is $7 million we got a $14 million exemption, but we got a $20 million dollar state.
[00:31:11.610]Brandon Dirkschneider: Okay, so we are $6 million above the exemption, which means we got a $2.4 million tax bill, because the federal state tax is currently at 40%.
[00:31:22.740]Brandon Dirkschneider: Well, if we can apply some of those lack control lack of marketability discounts on the value of our assets and let's say we can legally take a 30% discount on them.
[00:31:32.370]Brandon Dirkschneider: All a 30% discount on $20 million is $6 million $6 million down to 4 million, all of a sudden, we wiped out your federal estate tax bill just with some proactive planning again.
[00:31:44.040]Brandon Dirkschneider: you fail to do the plan you're going to pay the tax, if you are proactive and you do the plan.
[00:31:49.530]Brandon Dirkschneider: You can get around maybe a good chunk of those taxes and that's again why but not only is it you know, trying to treat family members fairly.
[00:31:57.150]Brandon Dirkschneider: But trying to make sure that all the assets stay within the farmer ranch operation, because we all know what it takes today to make that farm or ranch operation succeed.
[00:32:10.800]Brandon Dirkschneider: Another huge issue that's staring right at us and in fact I had two phone calls on this yesterday is asset valuation or basis Okay, so if we give an asset away.
[00:32:23.670]Brandon Dirkschneider: Okay out the don't he retains the donors basis Okay, so if if I give my daughter 40 acres and I paid $5,000 an acre.
[00:32:37.650]Brandon Dirkschneider: And when she sells it it's worth 8000 or when I die it's worth 8000.
[00:32:42.990]Brandon Dirkschneider: She doesn't get the step up in basis for the $8,000 an acre she retains my basis, which was $5,000 so she decides to sell it she's got a capital gain tax do.
[00:32:52.170]Brandon Dirkschneider: On the difference we want my basis was in the $8,000 that she's going to sell it out okay now based on current tax law today.
[00:33:00.150]Brandon Dirkschneider: If I passed away and I paid 5000 for it, and she inherited and, at the time it's worth $1,000 an acre now her basis is worth $1,000 an acre so if she sells at at that point in time.
[00:33:11.910]Brandon Dirkschneider: She doesn't know any capital gains tax shields no taxes, because she got to step up basis the time of my death okay.
[00:33:18.630]Brandon Dirkschneider: Now again there's new proposals out there, and on the tax law, and these are going to change.
[00:33:24.870]Brandon Dirkschneider: Every time an election takes place so it's just again being proactive, but the proposal today is that we're they are proposing to get rid of the step up and basis.
[00:33:34.770]Brandon Dirkschneider: And they're talking about getting rid of the step up in basis and paying capital gain tax, whether you realize the gain or not.
[00:33:42.210]Brandon Dirkschneider: Okay, and that's just a huge threat to our farming or farm and ranchers but I don't think it's going to happen, but you have to pay attention to it, you have to be proactive with that.
[00:33:53.610]Brandon Dirkschneider: If they do get rid of the step up in basis that and you do realize in you do realize the the capital gain you're going to old capital gain tax on it.
[00:34:03.300]Brandon Dirkschneider: So that may be a time of where Okay, do I gift assets or do I not get assets and what makes sense for the long term viability of the operation.
[00:34:11.910]Brandon Dirkschneider: While still security, maybe the Patriarchs and matriarchs financial independence for their IE retirement years so it's an important thing to be considered pay attention to.
[00:34:24.570]Brandon Dirkschneider: um let's talk a little bit about agreements that need to be into your farm or ranch operation okay.
[00:34:33.990]Brandon Dirkschneider: We see a lot of farm ranch in operations that don't have these types of.
[00:34:39.120]Brandon Dirkschneider: Succession agreements in place, one is buy sell agreements buy sell agreements is very, very important, especially when there's multiple family members.
[00:34:48.570]Brandon Dirkschneider: On the operation, because what you're doing is you're structuring the terms of certain event life events before the event even ever takes place so i'm going to use myself as an example, my father loans commercial feedlot operation he feeds about 10,000 head of cattle.
[00:35:04.980]Brandon Dirkschneider: And he's got a small row crop operation Okay, I have to brother in law's and my wife and I have a sister in law so there's four kids involved.
[00:35:14.160]Brandon Dirkschneider: Okay, currently there's nobody back at the operation Okay, but let's say there was let's say my brother in law moves back and he takes over the operation.
[00:35:24.450]Brandon Dirkschneider: And if there's no buy sell agreement in place and let's say his will states that all the assets are split evenly.
[00:35:32.280]Brandon Dirkschneider: Well, my wife could go and maybe force partition forced liquidation and sell it to the highest bidder.
[00:35:41.310]Brandon Dirkschneider: Well, what am I sell agreement would state is that any shareholder in the event of their death has to sell it back to a surviving active member of the family farm.
[00:35:52.200]Brandon Dirkschneider: You can't you can't sell it away from the farm so it's a legal agreement that's essentially going out grabbing that asset and pulling it back to the farm operation and structuring the terms of what that buy sell agreement is stating.
[00:36:03.720]Brandon Dirkschneider: So you can structure what price they're going to pay, you can start you can structure, the terms, you can structure funding.
[00:36:09.600]Brandon Dirkschneider: All that in detailed into a buy sell agreement.
[00:36:12.900]Brandon Dirkschneider: You can say is that across purchase where the surviving shareholders have first right to purchase those shares.
[00:36:19.110]Brandon Dirkschneider: And if they're surviving shareholders don't want to purchase them the company's going to redeem and as as treasury stock.
[00:36:24.330]Brandon Dirkschneider: that's a stock redemption between across purchase, so it becomes very important it provides a legal structure to say okay if we lose a family member if we lose a shareholder how are we going to pull those assets back so they remain with the family farm operation for future generations.
[00:36:40.740]Brandon Dirkschneider: Okay, the other aspect that's very important with the buy sell agreement.
[00:36:45.720]Brandon Dirkschneider: let's say my my father law dies assets are split four ways they hire if they hire a family farm manager okay.
[00:36:53.820]Brandon Dirkschneider: Well then, let's say my wife pre deceased as it passes away and her will states that I get everything well i'm an in law.
[00:37:01.290]Brandon Dirkschneider: I had nothing to do with the feedlot operation growing up, I don't work at the feedlot operation, why should that asset come to me.
[00:37:08.430]Brandon Dirkschneider: Well, that buy sell agreement can stay, even at again my wife's death, that the assets get pulled back because maybe one of my nephews or my nieces or maybe one of my own daughters want to take over the feedlot operation.
[00:37:19.770]Brandon Dirkschneider: Again it's just providing those structured terms on no matter who passes away when they pass away that it pulls that asset back to the family farm or ranch operation.
[00:37:31.170]Brandon Dirkschneider: Something else it's very important as cash rental lease agreements again using using a my family as a as an example, if my wife does inherit let's say 120 acres that she has to rent it back to the active family farm members, she can't go take it in a rented out to the highest cash rent.
[00:37:50.160]Brandon Dirkschneider: Better that cash rental agreement that or that crops your agreement, whatever seems more feasible for your operation just simply states okay.
[00:37:57.870]Brandon Dirkschneider: We deem it to be fair, that our state planning documents states that you're going to inherit a certain number of acres okay.
[00:38:04.470]Brandon Dirkschneider: But when you inherit those acres you have to run it back to the active family farm Member.
[00:38:09.390]Brandon Dirkschneider: Now if there isn't an active family farm maybe then you're free to rent it out to everyone, but if there's an active family farm Member, you have to rent those acres back.
[00:38:17.700]Brandon Dirkschneider: And you can even structure the cast rental rates inside of that cash rental agreement will go through more some more of these here to.
[00:38:24.540]Brandon Dirkschneider: The other thing is operating agreements and employee benefits talk about employee benefits because.
[00:38:30.660]Brandon Dirkschneider: While we talked about active children on the operation versus non active children on the operation it gets be very important, because while you're not active kids are out working.
[00:38:39.780]Brandon Dirkschneider: Maybe in corporate America, you know they're building up gay their side of the balance sheet with the 401k retirement plans stock options profit sharing.
[00:38:49.020]Brandon Dirkschneider: They got group health insurance they got group life insurance they get all these fancy benefits and they're building up their not necessarily their their balance sheet.
[00:38:56.400]Brandon Dirkschneider: While we have the on farm child who's basically you know, hoping to get the farm or ranch operation handed to them at some point in time when maybe the Patriarch matriarch pass away, hopefully, maybe sooner.
[00:39:07.650]Brandon Dirkschneider: But really they're not building up their own their own network statement to help that transition or providing.
[00:39:15.090]Brandon Dirkschneider: Risk management tools in the event that they pass away prematurely to take care of their wife kids spouse husband whatever place may be so.
[00:39:24.360]Brandon Dirkschneider: let's talk about buy sell agreements, a little bit more again, the purpose of the buy sell agreement is to create a plan that defines control value and disposition of the company stock or assets under defined trigger events.
[00:39:38.130]Brandon Dirkschneider: A trigger event is what he is the situations that should be addressed inside your buy sell agreement Okay, it should include death.
[00:39:46.740]Brandon Dirkschneider: It should include disability, it should include divorce disagreements bankruptcy felony retirement, so if one of those triggering events happen, you know exactly how that asset, or that company stock or the shares of those llc agreements are going to be redeemed from that person.
[00:40:06.990]Brandon Dirkschneider: Something else that's also important is the valuation factor can vary based on different triggering events, the internal revenue service allows us to do this, so it states that.
[00:40:17.520]Brandon Dirkschneider: If one of your children decides to get a dwi and they accidentally kill somebody and they're getting charged with a felony.
[00:40:28.650]Brandon Dirkschneider: Okay, and that families coming after you as as after you in the operation civilly for civil lawsuit.
[00:40:35.160]Brandon Dirkschneider: Okay, you can actually go in and say okay we're going to redeem your shares, because you committed a felony and we're going to buy your shares out at 80% of market value or 70% of market value.
[00:40:46.800]Brandon Dirkschneider: Okay, or you may miss manage your financial affairs and now you're filing for bankruptcy.
[00:40:52.200]Brandon Dirkschneider: we're going to buy your shares out, but we have a clause inside the buy sell agreement that states, because you file bankruptcy dot the corporation we're going to buy your shares out at a specified price.
[00:41:02.430]Brandon Dirkschneider: it's just a way to try to protect the operation and really go in and again cloth get that asset back put back in the operation, so the operation can succeed long term so buy sell agreements very, very important.
[00:41:16.710]Brandon Dirkschneider: Cash rent or crop sure green again very important why because it helps establish the differences and in between children and on active children.
[00:41:28.260]Brandon Dirkschneider: And it helps guide and direct the assets, we had a farm family down around south and east of Hastings they have one child that farms, they have two children that aren't farming.
[00:41:39.330]Brandon Dirkschneider: They wanted to make sure that that farm style that quit their corporate America job come back and run the farm operation have enough time to build up his equity his bouncy.
[00:41:49.800]Brandon Dirkschneider: So, in the event that when the patriarchal matriarchal the farm family passed away he had enough liquidity to be able to buy out his siblings in the event that his siblings wanted to be bought out so how did they do that well they left all their ground.
[00:42:03.810]Brandon Dirkschneider: into a trust okay for the non active children and that trust was holding that farm ground for a period of years, so he had the right to farm it for a period of years okay.
[00:42:18.090]Brandon Dirkschneider: And they the non inactive children got the right to the income stream after those period of years the trust distributed the asset outright based on what they've been fair.
[00:42:28.890]Brandon Dirkschneider: Okay, and hopefully at that time, he has enough equity that if it's one of the one of his siblings went out he can buy him out okay.
[00:42:36.810]Brandon Dirkschneider: And what you put inside of there, whether it's the buy sell agreement the trust agreement is that first right of refusal that gives him the right to buy those assets at a predetermined price.
[00:42:46.860]Brandon Dirkschneider: A lot of times we see taxes tax assessed value or maybe they'll actually say okay you got to go get an appraisal but we're going to after the appraisals done he gets to buy here she gets to buy it at a 20 or 30% discount.
[00:42:59.280]Brandon Dirkschneider: Okay, on that market value so again just putting the structure in the in the the triggers in place to make sure that the active farm child can but to manage it okay.
[00:43:12.480]Brandon Dirkschneider: lot of times you can predetermine what those cash friends or crop share agreements are.
[00:43:17.070]Brandon Dirkschneider: You can say you know what we've had people that specifically named you're going to go back and you're going to look at the most recent ul market study.
[00:43:25.170]Brandon Dirkschneider: And if we feel it falls into the high third of the category so you're in southeast nebraska it's high third quality it's irrigated ground that's the cash rental rate that you that.
[00:43:35.970]Brandon Dirkschneider: That you're going to run it from the trust from or you're going to rent it from your siblings if the siblings.
[00:43:42.450]Brandon Dirkschneider: end up owning it some people use the information for local FSA office a lot or some families, even just put it in writing.
[00:43:50.370]Brandon Dirkschneider: predetermined in the agreements, I don't necessarily like that, because they may use in a cash rental rate today.
[00:43:56.700]Brandon Dirkschneider: and death doesn't happen for 20 years we don't know what those cash flow rates are going to be 20 years from now, so I really like to use, you know whether it's the US market study that's published I think every March.
[00:44:06.810]Brandon Dirkschneider: or go to your local FSA office and establishing a fair market fair market rents in your local area.
[00:44:12.630]Brandon Dirkschneider: But it's still protects your in an inactive children and gives them a right to the income stream, it gives them right to user, and so the property if if there's river ground or there's ponds or there's pastors or something along that.
[00:44:24.390]Brandon Dirkschneider: it's been at structures, the terms in the event that ever taking place.
[00:44:29.100]Brandon Dirkschneider: Something else for your inactive children if you're active farms held simply can't afford it, or the bank's going alone and money.
[00:44:35.610]Brandon Dirkschneider: Then we talk about Okay, maybe that first Ryder refusal now extends to the non active child, because the active farm child and exercise their right.
[00:44:44.490]Brandon Dirkschneider: And you can even draw those into those agreements based on whatever your guys's goals and objectives are okay so let's talk about some common family scenarios really quick.
[00:44:56.400]Brandon Dirkschneider: Active farming children.
[00:44:59.100]Brandon Dirkschneider: I was dealing with the ranch family and they have.
[00:45:04.260]Brandon Dirkschneider: Three siblings that are currently working the ranch operation and all their kids want to come back.
[00:45:09.960]Brandon Dirkschneider: Well, the first question, you have to ask yourself yeah you may want to see all your grandkids come back or you may want to see all your children come back, but can the operation actually support that.
[00:45:19.290]Brandon Dirkschneider: Have you done a cash flow analysis to say Okay, can the operation support them.
[00:45:23.490]Brandon Dirkschneider: Or do we need to have a portion of them or their spouses or they work part time and they get an off the farm income up until a point in time, where.
[00:45:31.290]Brandon Dirkschneider: The patriarchal matriarchal or their parents wants to retire from the operation and, more importantly, does everybody know their roles.
[00:45:38.280]Brandon Dirkschneider: Should somebody be responsible for the road crop operation and somebody gets the decisions over the livestock operations so there's not that infighting on there.
[00:45:47.730]Brandon Dirkschneider: Those are important questions to ask, especially if all the children, want to come back to the operation, what if you have non active farm children.
[00:45:55.170]Brandon Dirkschneider: Is there a role for that not active child Have you ever asked the non active child do they want to be involved.
[00:46:02.100]Brandon Dirkschneider: we're working with the farm family right now the there's a non active farm child that lives in omaha he's a CPA very intelligent.
[00:46:11.190]Brandon Dirkschneider: His role within the operation is to do the financial balance sheets to do the cash flow projection stuff now the tax returns oh and he's also market and helping marketing the grain and the livestock.
[00:46:20.880]Brandon Dirkschneider: But he doesn't do the day to day, so are there opportunities to get your non after child involved in some little scenarios if years you'd want to be.
[00:46:29.040]Brandon Dirkschneider: But then it's also that not act, the child that they don't want to be involved okay what's the concept of fair versus equal and how do we determine that one of my favorite.
[00:46:39.750]Brandon Dirkschneider: Things that we that we've utilized in a lot of these, as you know, maybe you give the active farm child 1% of the farm assets for every year, they were back so if they were back 30 years.
[00:46:54.210]Brandon Dirkschneider: they're getting 1% for every year, so the farm assets they're getting the first 30% and then the up the remaining 70% is split equally between all your children.
[00:47:04.710]Brandon Dirkschneider: Not that's one of my better ideas, because you're compensating that active foreign child for all their years of service.
[00:47:10.890]Brandon Dirkschneider: and helping them build up their balance sheet, so it allows them to go to the banker and say, Mr Mrs banker, I have a sibling that once out of the operation, I have 30% equity in the in the family farm operation will you loan me the money to buy out my non active sibling okay.
[00:47:28.560]Brandon Dirkschneider: Active farm family is there a brother or sister you farm web today and what are their plans, knowing what they want, when they retire or death or disability, so you put those plans together.
[00:47:40.320]Brandon Dirkschneider: and make sure that there's buy sell agreements and certain estate planning documents structured again to pull that asset back the operation.
[00:47:47.850]Brandon Dirkschneider: Or what happens if there's non family members, what happens if you don't have that fat that that successful coming in.
[00:47:54.990]Brandon Dirkschneider: You still need to do this type of planning why, because otherwise Uncle Sam is going to be your biggest partner.
[00:48:01.980]Brandon Dirkschneider: One of the one of the biggest growing factors were getting involved with today, as far as families that don't have that successor, because what our family farm farmers doing.
[00:48:11.310]Brandon Dirkschneider: they've pre put the they've pre paid their inputs for the upcoming crop year they're sitting on.
[00:48:16.080]Brandon Dirkschneider: The crop of all all the previous crop year and they're saying you know what i'm going to want to get out so if they want to get out the end of 2021 crop season.
[00:48:24.390]Brandon Dirkschneider: And they have an auction liquidating their equipment they don't have any prepaid expenses and they're still selling grain possibly from 2020 year old crop and 2021 new crop Uncle Sam loves you.
[00:48:35.400]Brandon Dirkschneider: And there are a lot of ways to proactively minimize uncle sam's cut in that if you just do it, maybe with the three to five year timeframe.
[00:48:46.380]Brandon Dirkschneider: Or if you identify a successor in your operation that maybe it's not a family member like Alan talked earlier about land leak land link in nebraska has a program called next gen.
[00:48:57.390]Brandon Dirkschneider: That you can proactively put an exit strategy together that's going to minimize your tax the tax your tax liability do.
[00:49:04.140]Brandon Dirkschneider: and enable you to help guide and mentor make decisions to that non family member or maybe over the next 234 or five years so.
[00:49:12.480]Brandon Dirkschneider: Even if you don't have a success and coming back it's still very valuable to do the succession planning, but we just don't call it succession planning we call it exit planning so still very important to do that planning.
[00:49:26.550]Brandon Dirkschneider: um here's The one thing that I will tell all of you, if you have anybody that comes up and says they can do this to.
[00:49:37.830]Brandon Dirkschneider: That they can do this by themselves wrong you really need a team around you in that team look kind of looks like this, not all the time, but always going to include your accountant.
[00:49:51.060]Brandon Dirkschneider: it's always going to include an attorney usually includes your banker lender your crop insurance agent, maybe you're an investment advisor maybe a real estate invades.
[00:50:00.660]Brandon Dirkschneider: agent is involved and then there's somebody like myself who's the farm succession coordinator, the certified financial planner that's proactively putting the plan together.
[00:50:09.450]Brandon Dirkschneider: And we're working together as a team to make sure that your goals and objectives are getting accomplished and we're not.
[00:50:15.720]Brandon Dirkschneider: adversely affecting you from attack scenario or any potential estate planning documents or current planning that you did so always really build a team and make sure they're an expert in their arena okay.
[00:50:28.620]Brandon Dirkschneider: And what I see an expert in their arena, I see too many individuals that are generalists they try to be all things to all people.
[00:50:34.920]Brandon Dirkschneider: You really need to find those people that really specialized within their industry they're truly an estate planning attorney they understand the marketplace.
[00:50:43.140]Brandon Dirkschneider: they're not running around doing bankruptcies child custody divorce defending duis and also trying to be an estate planner you need that.
[00:50:52.410]Brandon Dirkschneider: True specialist because if you don't have the right terminology, if you don't have the right verbiage you're going to miss something and then it's just going to create issues okay.
[00:51:04.740]Brandon Dirkschneider: yeah let's go.
[00:51:06.840]Allan Vyhnalek: I have a question that came in on on the queue.
[00:51:10.710]Allan Vyhnalek: It says, do you have you have to hire the lawyer, create a buy sell agreement or can you just do online.
[00:51:19.260]Brandon Dirkschneider: I would hire a lawyer every single time to do a buy sell.
[00:51:21.660]Brandon Dirkschneider: Agreement because the general documents online.
[00:51:24.600]Brandon Dirkschneider: don't address every issue that you should be covering.
[00:51:28.260]Brandon Dirkschneider: In my opinion, it's not a time to go on legal zoom.com and pull up one of their generic buy sell agreements because you'll miss something, and it will cost you money here, it will cost you headaches down the road.
[00:51:45.090]Brandon Dirkschneider: i'm leaving a legacy, this is the number one thing that I see from everybody, they want to make sure that they're leaving a legacy for their future and i'm going to tell you guys a quick story right here.
[00:52:00.270]Brandon Dirkschneider: You, hopefully, you can hear the passion in my voice, because the reason i'm so passionate about this today is because migrant my maternal grandfather.
[00:52:09.360]Brandon Dirkschneider: was a statistic of the 80s, he went broke, he was a hog and row crop farmer and he didn't make it through the 80s my paternal grandfather died of pancreatic cancer, when he was 56 I was 12 years old and walk and sat on his farm place to watch the farm auction.
[00:52:29.280]Brandon Dirkschneider: And not saying that I would have been taking over the family farm operation, but I was his only grandson and I was the oldest grandson.
[00:52:37.140]Brandon Dirkschneider: And at the time he had a nice size operation, but when he died he died in 1990 just coming out of the 80s and he didn't have a plan.
[00:52:47.220]Brandon Dirkschneider: He didn't have life insurance to pay off his debt he didn't have health insurance to pay his medical bills and the Bank wanted to get paid off.
[00:52:54.330]Brandon Dirkschneider: And so I sat on the farm with my dad who are the different business but I sat on the family farm watch everything get auctioned off and say okay.
[00:53:03.540]Brandon Dirkschneider: looks like i'm not going to be farming and I don't today I don't have that privilege I would give anything in the world to do that.
[00:53:12.600]Brandon Dirkschneider: I still go back and help my father in law, I still enjoy every aspect of that but, for your legacy for what you want to do.
[00:53:20.850]Brandon Dirkschneider: Those plans are priceless they're absolutely priceless and there's a lot of tools that you can use.
[00:53:28.260]Brandon Dirkschneider: To help mitigate those risks, whether it's long term care insurance to mitigate the risk associated with nursing home Assisted Living facilities.
[00:53:35.940]Brandon Dirkschneider: Whether it's life insurance to help liquidate depth or pay the federal estate tax or maybe it's equalized in a state between siblings or the term life insurance to fund a buy sell agreement.
[00:53:46.980]Brandon Dirkschneider: they're all just tools in the toolbox, and some of those tools are just completely.
[00:53:54.360]Brandon Dirkschneider: invaluable to make sure that you can leave a legacy, not only to your children and your grandchildren, but hopefully, maybe even your great grandchildren someday.
[00:54:04.320]Brandon Dirkschneider: Because we don't want your operation to be that statistic one generation to build it up one generation to maintain it.
[00:54:10.230]Brandon Dirkschneider: And the third generation that doesn't get to because they're buying out they're not active family members, because the farm was split equally.
[00:54:18.360]Brandon Dirkschneider: Ellen and I know a speaker out of the moment I forget his name but from Oklahoma state and they ran 1000 different Monte Carlo simulations.
[00:54:27.540]Brandon Dirkschneider: And if you split your farm or ranch evenly between active inactive children there's a 90% chance that your farm family farm or ranch will be there for the next generation.
[00:54:38.760]Brandon Dirkschneider: So this process going through this process, I can't stress enough how important it is for you so with that I will answer as many questions as you guys have.
[00:54:53.730]Brandon Dirkschneider: As they come in and hopefully you guys found a very valuable.
[00:54:58.110]Allan Vyhnalek: yeah so Ryan.
[00:55:00.630]Allan Vyhnalek: brandon that my my comment about that is simply this is what we what I think happens is that the people.
[00:55:07.770]Allan Vyhnalek: That put the people that actually into the operation are very determined to keep.
[00:55:14.760]Allan Vyhnalek: That land in their family and the next generation, it does doesn't necessarily grew up on the farm and doesn't have the sweat equity doesn't necessarily.
[00:55:22.740]Allan Vyhnalek: want to just sort of worried about whether they keep the land in the family, I think that's my observation about that I wish I had sickle cell disease and study on.
[00:55:31.080]Allan Vyhnalek: Your own for higher silver's brandon would you put in an.
[00:55:35.040]Allan Vyhnalek: email address when people get get all the I could I could I could I could.
[00:55:39.930]Allan Vyhnalek: I could hear you got there there you go you got it.
[00:55:47.100]Okay.
[00:55:48.570]Allan Vyhnalek: yep that's how you get hold of brandon.
[00:55:52.890]Allan Vyhnalek: And you know, he did he did this, they kind of just on vacation day, quite honestly, so I appreciate.
[00:56:05.130]Allan Vyhnalek: Any other questions that come in.
[00:56:08.910]Allan Vyhnalek: Changing did the guidance, you talked about a remote on staging with shane somebody wasn't it.
[00:56:13.920]Brandon Dirkschneider: I can pull him up real quick here.
[00:56:15.930]Allan Vyhnalek: Now it's not important it's not it doesn't but what what you described is absolutely accurate if we if we don't put agreements or a structures to protect that that that said that gone for kids.
[00:56:31.830]Allan Vyhnalek: To stay on the farm, then you really you're gone the somebody will want to step in and.
[00:56:39.750]Allan Vyhnalek: They want their money, and if we expect our kids to buy out the other kids prob do right away immediately that's going to be a problem they.
[00:56:48.480]Allan Vyhnalek: don't be able to afford to do is what's, especially with today's land prices now.
[00:56:52.680]Brandon Dirkschneider: So yeah and if you guys if you got emails there's my email address my phone number, I am happy to answer as many questions as I can, and at least get you pointed in the right direction if if we're not able to help us so Ellen.
[00:57:06.750]Brandon Dirkschneider: Thank you Eric a question, a question just came up.
[00:57:10.230]Allan Vyhnalek: That says recording to work with watch the recording of Ryan, you have to answer it well, quite honestly, if you just.
[00:57:17.250]Allan Vyhnalek: You know.edu and you look for the for the Thursday webinar series all the all the old webinars are up i've done three or four of them since.
[00:57:27.360]Allan Vyhnalek: April was almost a year now and we're more than happy to you weren't happy to go back to my archive and Ryan, if I didn't say that right, please fix it for me you just tell me.
[00:57:38.940]Allan Vyhnalek: what's going on recording should be up by noon tomorrow it's available at farmed out you know.edu slash webinars so you know that's the answer that question so on the chat.
[00:57:49.680]Allan Vyhnalek: I one more thing to say we'll see if there's any more questions that came in.
[00:57:55.980]Allan Vyhnalek: So I am I supposed to say this i'm supposed to say hey thanks for watching today, we appreciate very much and.
[00:58:03.120]Allan Vyhnalek: A webinar we posted a farm that you know that you are working for you can register for upcoming webinars.
[00:58:07.980]Allan Vyhnalek: Join us for the next webinar in our series next Thursday at noon central and it's going to be on our financial monthly financial series look into nebraska sales tax and agricultural exemptions.
[00:58:18.810]Allan Vyhnalek: You receive you will receive a short survey in your email really appreciate you feedback for today's webinar and your input for future session sessions, I assume that you have an llc when you're operating agreements different from the buy sell agreement.
[00:58:34.980]Allan Vyhnalek: that's the.
[00:58:35.460]Brandon Dirkschneider: Question yeah.
[00:58:36.690]Brandon Dirkschneider: Right llc.
[00:58:37.950]Allan Vyhnalek: That correct.
[00:58:39.120]Brandon Dirkschneider: That is correct, an llc will have an operating agreement basically you determine detailing the terms of what the Members of the llc can and cannot do with the buy sell agreement.
[00:58:48.690]Brandon Dirkschneider: Is for what happens to those shares in the event of death disability divorce retirement things of that nature so they're completely different.
[00:58:58.470]Allan Vyhnalek: There was a question that came in via email yesterday and said you address the pros and cons of lifetime use in regards to the State planning, I think we already.
[00:59:06.660]Allan Vyhnalek: talked about that nursing homes and all that sort of thing I think you covered that quite nicely earlier in the presentation that person's got other questions they should let us know.
[00:59:17.550]Allan Vyhnalek: or get Ahold of you or get a hold of you.
[00:59:21.330]Allan Vyhnalek: Some of this stuff gets to be the technical part of it and you need a lawyer, a lawyer, and so I can't I won't be able to help as much.
[00:59:28.050]Brandon Dirkschneider: I agree completely.
[00:59:29.850]Allan Vyhnalek: All right.
[00:59:31.710]Allan Vyhnalek: I think, with that it's one o'clock do the questions coming in, we answered that one oh here's where is brandon.
[00:59:39.150]Allan Vyhnalek: Miller and actually This is where but he's offices in West omaha long West dodge and so.
[00:59:46.950]Allan Vyhnalek: But he travels the state, I mean it's god's law i've seen him in Hastings i've seen you in all the places in between so Brendan Brendan actually grands going with me to do a seminar one of these seminars for the dairy industry down in the atmosphere next month, so.
[01:00:05.160]Allan Vyhnalek: There you go hey brandon brandon can be anywhere right Randy and I have did three three sessions are ranking the one I did three sessions down and Byron nebraska and if you don't know where that said you gotta look that up because you can throw a stone to Kansas.
[01:00:19.440]Allan Vyhnalek: To the to the south it's good to South East Hastings violent Kansas border all right.
[01:00:27.540]Allan Vyhnalek: I think that's all the questions women who got yeah yeah Those are all tinker alright thanks everyone have a great day, you should have.
[01:00:34.110]Brandon Dirkschneider: Right, thank you.
[01:00:35.670]Brian.

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Succession and Estate Planning for Farm and Ranch - Part 2

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