1. Time for a Change on the Family Farm Oklahoma State University National Extension Risk Management Conference March 26-27, 2003 J.C. Hobbs, Area Extension Agricultural Economics Specialist Lori Shipman, Extension Associate

2. History Organized advisory council. – Objectives – Scope Held in-service for extension educators. – Sequence Presentations for the public. – Solid set of materials developed Developing a website with video streaming.

3. Objectives To provide a comprehensive set of materials and information to present to farm families contemplating retiring from, leaving, or transferring family farm operations. To provide adequate follow-up through programs and individual visits to see families develop actual farm plans

4. Time for a Change Program Topics Goals Estate Planning Financial Inventory Retirement Income Shifting Ownership and Asset Transfer Shifting Control and Compensation Investing Off-Farm Insurance Advisory Team Communications

5. Goals Begin with the end in mind to determine the journey. Write down goals that are S.M.A.R.T. – Specific, Measurable, Action-oriented, Reasonable, Timetable Stress the importance of adult family member inclusion in the goal development process. Provide a start that will reduce expenses in the long run.

6. Estate Planning Issues Minimize estate settlement costs to ensure that the business remains viable. Transfer farm business and other assets to those that we want to have them and make sure the transfers maximize the estate tax benefits. Provide a general overview of estate planning tools and transfer issues plus explain the estate tax laws.

7. Financial Inventory Determine the financial state of the business now – Asset inventory – Liability list Create financial statements for understanding and financial management planning. – Intensive Financial Management and Planning Support (IFMAPS) – Integrated Farm Financial Statements (IFFS) software Proactive planning for retirement or adding a second generation.

8. Retirement Income Determine common sources for income at retirement. – Social Security – Pensions and retirement plans – Investments – Sale or lease real estate and assets Determine a retirement lifestyle. – Travel – Volunteer work – Farm work

9. Shifting Ownership & Asset Transfer Alternatives Evaluate ownership transfer alternatives and the income tax implications for the following options for transferring assets. – Outright sale of the business assets – Installment sales contracts – Gifting of assets – Combinations of these alternatives Discuss pros and cons of business organization types. – Partnerships, LLCs, corporations

10. Shifting Control & Compensation Transfer ownership/management of the business from the existing to new generation. Determine an equitable share of the income for each party. Discuss the transfer stages. – Testing - Commitment - Establishment - Withdrawal

11. Investing Off-Farm Understand the need to invest in other assets than land. Understand the risks, costs, and growth of investing. – Investment pyramid – Read, read, read Teach “save early, save often and invest wisely”.

12. Insurance Discuss the alternatives available for insurance. – Health HMO, PPO, POS, High Risk Pool, Group or Individual Coverage Medicare and Medicaid – Long-term care Types Tax advantages Coverage Nursing home costs and government look-back period

13. Advisory Team Develop a team of “experts” to help develop a solid plan. – Accountant, tax preparer, CPA – Attorney – Financial planner Prepare to interview the advisors for selection. – Experience, references – Continuing education Determine needs. – Payment terms – Availability – Team effort – If it isn’t working – Change advisors

14. Communications Schedule appropriate meeting times in neutral settings to discuss farm business. – Include the appropriate adult family members Develop an understanding of family member personalities and communication styles. – Personality I.Q. (True Colors)

15. Program Delivery Determine the appropriate delivery. – 2-4 Evening or day sessions Consecutive One or two nights/days per week during the month Select speakers for sessions. – State Specialists – Area Specialists – County Educators – Private insurance agents prepared to deliver education not sales

16. Cost of Program Notebook of materials and workshop – $35 per couple – $50 per family unit with one set of materials Light lunch or dinner provided – Cost reimbursed to county

17. Impact Five workshops held, 1 planned 37 families (approximately 73 people) High marks for delivery and topics Participants mark that they intend or strongly intend to use the knowledge they have gained in their plan One former participant stated, after the death of a spouse: “The transition was traumatic, but it was much smoother than it could have been, because they had attended the Time for a Change program.”

18. Follow-up Met with families individually. – Estate planning – Financial planning – Ownership alternatives Presented requested programs. – Quicken for Farm Financial Records workshops www.agecon.okstate.edu/quicken – Estate planning – Property ownership

19. New Approach Website and CD – Video streamed presentations – Links to fact sheets and other valuable information www.agecon.okstate.edu/TFAC

20. Questions?? For more information contact: Lori Shipman 405-744-9836 Lship@okstate.edu J.C. Hobbs 580-237-7677 Hobbsj@okstate.edu Damona Doye 405-744-9836 Ddoye@okstate.edu