Collecting Information Personal –Family details (step relationships; marital history) –Key business people (any non-family?) Financial –Values (fair market, agricultural, development, subsurface) –Joint (survivorship rights, life estate) –Restrictions (ACE, roll-back taxes)

Gathering Documents Family (pre-/post nuptial) Operational (buy/sell, first refusal, option) Asset (deeds, non-farm leases) Estate planning (wills, trusts, powers of attorney, living wills)

Establishing Goals Financial security (for whom?) Equal v. equitable distributions Continuation or liquidation of business Control (by whom?) Tax reduction/minimization

When to Implement Your Succession Plan Involuntarily – (death or disability) –What if you die or become disabled today? –Your business will be transferred – planned or unplanned Voluntary - a planned succession –Usually a 25-year process –Non-real estate – begin by age 30 –Real estate by - begin by age 45

“Sample” Timetable for Transition of Farm Business within Family DescriptionParent’s AgeChild’s Age 1. Parent acquires real estate from the grandparent Child begins working full time in farm business as employee Parent and child form a joint operating entity (partnership or corporation or LLC) and child begins to acquire ownership of operating assets in the farm business Parent “retires” and turns farm business over to child and sells remaining operating assets (non-real estate assets) to child Parent sells real estate to child, who operates the farm and the cycle begins again. 7346

Tax Considerations Death/gift (federal and state) Income (ordinary, capital gain) FICA and self-employment Real estate (Clean and Green) Realty transfer (family farm/ familial exemptions) Capital stock (impacts corporations and LLCs) Sales/use (vehicles)

Non-Tax Considerations Control of Operation/Assets Legal Entity (liability exposure) Liquidity issues for non-liquid business/farm Marital issues (divorce) Nursing home care expenses/Medicaid Windfall gain from early departure Government farm programs –Beginning Farmer Programs –Payment limitations

Ag Law Mette, Evans & Woodside Gary J. Heim, Esquire Jennifer Denchak Wetzel, Esquire

Mette, Evans & Woodside 3401 North Front Street P.O. Box 5950 Harrisburg, PA Phone: (717) Fax: (717)