1. Farm Transition & Estate Planning: Helping Ohio Families Face the Future Chris Bruynis, PhD Assistant Professor & Extension Educator David L. Marrison Associate Professor & Extension Educator CONNECTING THE OHIO STATE UNIVERSITY TO OHIOANS

2. Problem Statement Average Ohio farmer – 57 years old – Majority has not named a farm business successor – No current farm business transition plan Research shows – >1/3 of all family businesses successfully transition from first generation to second generation – >1/3 of those eventually transition to the third generation

3. Teaching Objectives Increasing knowledge – Current planning tools – Current tax laws Encourage family communication Encourage starting and completing many pieces of their transition plan

4. Multiple Styles & Models Presentation format varies from – Lecture with suggested readings – Activity based format with case studies and suggested document organization Delivery ranges from – Multiple day workshops – Full day workshops – Presentations within a larger workshop – Evening programs (2-3 hrs)

5. Teaching Approach No one correct plan Multiple tools available – Each has its own pros and cons Personal planning objectives will determine which tools Communication is critical to success Don’t forget the untitled assets and goodwill agreements

6. Whole Farm Planning Model

7. Answer this Question Do I want to pass my family business on to my heirs as an ongoing business or do I want to pass it on as a group of assets?

8. Transition Planning Assumes a next generation Involves – Growing the business to accommodate more families – Selecting and training a successor – Gradually turning over control of the business – Creating an estate plan that protects the on-farm heir(s)

9. Estate Planning The transfer of assets (the estate) from one generation to the next – Ownership of assets (sole proprietor verses limited liability company or s-corporation) – Treatment of heirs – Step-up in basis issues with different plans – Probate concerns – Trusts, TOD’s, Power of Attorney, Wills, etc

10. Retirement Planning Planning cash flow needs in retirement – Identifying the retirement dream (and how much it might cost!) – Estimating future cost of living Rule of 72 & rule of 115 – Potential cash income from owned assets Both on farm and off farm holdings – Long term care planning and cash needs

11. Importance of Planning Business Entity Documents are the glue that keeps a business plan together – Partnership agreements – Corporation bylaws – LLC operating agreements These documents control – Who are the owners – Ownership percentages – Management authority – Transfer restrictions – Dissolution terms

12. Meeting Evaluations Evaluation data showed – Increased knowledge on estate tax laws – Improved communication and expectations between generation – Sense of urgency to start working on a transition plan to reduce risk exposure – Sought out professionals to help create the transition/estate plan.

13. Transferring Your Farm Business to the Next Generation Bulletin OSU Extension Bulletin 862 available at – http://estore.osu-extension.org http://estore.osu-extension.org 89 page bulletin helps families plan for he future of their business by examining the following questions: – 1) Do I want to pass my farm operation to my heirs as an ongoing business or do I want to pass it on as a group of assets? – 2) How can you tell if the business is profitable enough to provide for the next generation? – 3) Are there enough income and assets to provide for the older generation’s wants and needs? – 4) How can you help the two generations get along? – 5)What should you transfer and in what order? – 6) How can you avoid paying too much income, gift and estate taxes?

14. Transition Planning Factsheets Available athttp://ohioline.osu.edu/bst- fact/index.html – A Comparison of Business Entities Available to Ohio Farmers – Conducting a SWOT Analysis of Your Agricultural Business – Conducting Successful Family Business Transition Meetings – Develop a Useful Mission Statement for Your Agricultural Business – Developing Goals for the Agricultural Business – Developing the Next Generation of Managers – Planning for the Successful Transition of Your Agricultural Business – Starting, Organizing, and Managing an LLC for a Farm Business – Tax Characteristics of Business Entities Available to Ohio Farmers – Using Liability Limiting Entities to Manage Liability Exposure for Ohio Farms – Is a Prenuptial Agreement Right for Your Farm Business? – Whole Farm Planning Model

15. Basic Estate Planning Factsheets Available at http://ohioline.osu.edu/ep-fact/http://ohioline.osu.edu/ep-fact/ – Introduction to Estate Planning – Costs Involved in Transferring Property – Tax Basis if Property Is Transferred – Why Have a Will? – Letter of Instruction – Life Insurance – Trusts – Giving – Sale of Residence – The Nursing Home Dilemma – Medicare and Medigap – Miscellaneous Issues

16. For More Information Chris Bruynis, PhD Assistant Professor & Extension Educator OSU Extension, Ross County, Ohio Valley EERA bruynis.1@osu.edu 740-702-3200 or David Marrison Associate Professor & Extension Educator OSU Extension, Ashtabula County, Western Reserve EERA marrison.2@osu.edu 440-576-9008