1 Copyright University of Minnesota. All Rights Reserved. Farmers’ Evaluations and Behavioral Changes Due to Attending Farm Transfer and Estate Planning Seminars Gary A. Hachfeld Regional Extension Educator University of Minnesota Extension 2007 National Farm Management Conference Rochester, MN., June 2007

2 Copyright University of Minnesota. All Rights Reserved. Today’s outline: Motivation for program Program goals Development, delivery, & evaluation process Farmers’ evaluations and behavioral changes Impact of program seminars Conclusions and lessons learned

3 Copyright University of Minnesota. All Rights Reserved. Motivation for program: Minnesota has 79,300 farms 91% are sole proprietorships owned and operated by farm families Total assets: $89.2 billion Average age: 53

4 Copyright University of Minnesota. All Rights Reserved. Iowa State survey of farmers: 50% had no estate plan 71% had not named a successor 20% had spoken to a banker 30% to an accountant 28% to an attorney

5 Copyright University of Minnesota. All Rights Reserved. Successful Farming survey: 30% of US farm families have not discussed their plan with family members.

6 Copyright University of Minnesota. All Rights Reserved. Minnesota farmers’ questions: Reducing/eliminating all tax consequences Transferring the farm business in light of long-term health care issues Keeping the farm in the family Starting the next generation in farming Exiting generation retiring comfortably Treatment of heirs Power-of-attorney Life insurance issues

7 Copyright University of Minnesota. All Rights Reserved. Program goals: To introduce farm families to farm transition and estate planning concepts and techniques. To outline strategies and procedures to consider when developing a transfer and estate plan. To address risks arising from lack of: –Succession planning –Intergenerational goal setting –Implementing a farm transfer and estate plan End result: farm families draft & implement plans

8 Copyright University of Minnesota. All Rights Reserved. Development, delivery, & evaluation process: Team approach Program format, materials, & sponsors Program agenda Evaluation process: End-of-meeting evaluation & results Post-meeting evaluation & results

9 Copyright University of Minnesota. All Rights Reserved. Program Team: Regional Extension Educators (REEs) –3 with farm transfer and estate planning expertise –2 with tax and farm management expertise Collaborators on material: –CFP, attorney, MNSCU adult farm management instructors Only REEs presented –NO advisors, attorneys, lenders, etc. Educational focus NOT sales/consultative focus

10 Copyright University of Minnesota. All Rights Reserved. Program format, materials, & sponsors: Interactive, face-to-face workshops 5 hours with breaks & lunch included Presenters utilized PowerPoint slide show Participants received a copy of the program workbook to take home Sponsors: –Paid a flat fee to be a sponsor –Responsible for date, location, recruitment, food REEs responsible for content and delivery

11 Copyright University of Minnesota. All Rights Reserved. Program workbook included: All PowerPoint slides 25 information sheets: –Detailed information on farm transition, estate planning, and farm financial management Worksheets used during the presentation Website addresses for additional information Registration & end-of-meeting evaluation

12 Copyright University of Minnesota. All Rights Reserved. Program agenda: Welcome, outline of day, & registration Workbook chapters: –Preparing to transfer the farm business (goals) –Tax considerations –Overview of farm transition strategies –Financial considerations –Estate planning issues –Treatment of heirs and financial assistance –Developing a written transition plan Additional questions End-of-meeting evaluation

13 Copyright University of Minnesota. All Rights Reserved. Evaluation process: End-of-meeting evaluation –Understanding – 5 point Likert scale –Status and plans –Comments about the program Post-meeting evaluation (6 months later) –Progress on plans & barriers encountered –Usefulness of workbook –Quality of program –Topics for a second meeting

14 Copyright University of Minnesota. All Rights Reserved. Farmers’ evaluations & behavioral changes (end-of-meeting evaluation): 12 workshops –October 2005 – April 2006 –23 local sponsors 524 farm family members –301 farm business units –Participants from 191 different communities –Ages: 22 to 89 (49% over age 55) –33% female; 67% male 296 surveys completed (56%)

15 Copyright University of Minnesota. All Rights Reserved. Self-reported understanding of educational points due to workshop: “strongly agree” or agree” Need for clear goals and communication99% Transfer strategies96% Importance of assessing financial strength92% Tax issues87% Wills, trusts, and estate planning strategies94% Life insurance, power-of-attorney, and health care issues 90%

16 Copyright University of Minnesota. All Rights Reserved. Self-reported status of current plans: YesNo Up-to-date estate plan?42%58% Up-to-date farm transfer plan?5%89% If no, plan to start farm transfer process due to workshop 81%4%

17 Copyright University of Minnesota. All Rights Reserved. Post-meeting evaluative process: Process: –Mail-out survey with return envelope –Followed final program by six months –301 farm units surveyed –152 farm units returned surveys (51%)

18 Copyright University of Minnesota. All Rights Reserved. Post-meeting evaluative results: Farm transfer plan progress: –59.4% reported starting the process –12.5% had completed the process Estate plan progress: –57.3% reported starting the process –7.3% had completed the process

19 Copyright University of Minnesota. All Rights Reserved. Post-meeting evaluative results: Barriers encountered: –Finding time to complete the process –Difficulty developing farm, family, & personal goals –Lack of family consensus & disagreement among heirs –Difficulty finding the right professionals –Parents not ready to retire & give up control –“Life events” taking us away from the process

20 Copyright University of Minnesota. All Rights Reserved. Post-meeting evaluative results: Program rating (poor, fair, neutral, good, excellent): –95% of participants rated the program good or excellent Rating usefulness of workbook (yes or no): –97% of participants rated the workbook as a useful reference

21 Copyright University of Minnesota. All Rights Reserved. Impact of seminars: Estimated farm business assets involved in this program: approximately $339 million –Average balance sheet for Minnesota farm: $1,125,335 (FINBIN) –301 farm business units participated Potential Program Impact: –59% of 301 farm units attending represents $200.3 million Actual Program Impact: –12.5% of 301 farm units attending represents $42.8 million –12.5% of 152 farm units responding represents $21.4 million

22 Copyright University of Minnesota. All Rights Reserved. Conclusions: Program was successful 99% of participants agreed or strongly agreed with the need for clear goals and good communication Reported improved understanding of transfer strategies Reported better understanding of other educational points –Educational points involve complex options and details –So the improved understanding for goals, communications, and strategies, tax, and estate planning issues is a very good omen Able to demonstrate potential & actual financial impact as a result of the program effort

23 Copyright University of Minnesota. All Rights Reserved. Lessons learned: Farm business succession, estate planning, and elder law are very complicated Laws change frequently so accurate, up-to-date information is crucial Working with an attorney is critical: One who understands agriculture and specializes in business succession, estate planning, and elder law Working with an accountant or tax consultant is critical: One who understands agriculture, tax law and the consequences of tax issues on the transfer process Do not have these professionals present the material: Extension is seen as not selling anything, thus trusted An attorney or accountant is perceived as selling services Can cause program to go in direction not intended

24 Copyright University of Minnesota. All Rights Reserved. Lessons learned, cont. Work with local sponsors to market the program: –A local sponsor inviting their customers to the program results in much better attendance The workbook is critical as a handout: –large amount of information on a complex topic –future reference piece

25 Copyright University of Minnesota. All Rights Reserved. In summary: Minnesota participants reported low levels of up-to-date estate and transfer plans Not much different other states Workshops had large impact: –Participants reported increased understanding of the program educational points –Able to demonstrate both potential and actual financial impact The final conclusion is that we will continue to present these workshops in the future given: –Positive response to these workshops –Obvious need expressed by farmers and others –The age distribution of farmers

26 Copyright University of Minnesota. All Rights Reserved. Acknowledgements: David Bau, REE, U of M Extension, Worthington, MN. Rob Holcomb, REE, U of M Extension, Lamberton, MN. Jim Kurtz, REE, U of M Extension, Worthington, MN. Bill Craig, REE, U of M Extension, Crookston, MN. Kent D. Olson, PhD, APL, U of M, St. Paul, MN.

27 Copyright University of Minnesota. All Rights Reserved. Questions? Comments? Contact information: Gary Hachfeld, Regional Extension Educator Kent Olson, Professor A “pdf” of the workbook is available by