1. Transferring Your Estate You Bought It and Built It: Now What? Brett Crosby Custom Ag Solutions United States Department of Agriculture Risk Management Agency (RMA) January 22, 2011

2. 2 Program Sponsorship, Coordination, and Delivery USDA / Risk Management Agency (RMA) –Oversees $62B Federal Crop Insurance Program –St. Paul, MN, Regional Office (One of Ten) –Relatively Few Employees (About 500) –Main Offices in Washington, DC, and Kansas City, MO Custom Ag Solutions –Crop Insurance Education Programs –Risk Management Tools (BeefBasis.com and CTRAT) –Rural Appraisals –Technology Development

3. 3 Disclaimer Custom Ag Solutions is neither legal counsel nor tax advisor. This presentation is intended to inform, but not advise. Before taking any estate planning steps, you should consult with legal and tax professionals.

4. 4 Planning For Transition Why Plan? Provide For Retirement Provide For Heirs Minimize Tax Burden Ensure A Legacy Family Unity

5. 5 Steps To Succession Build Succession Team Professionals Successors Inventory Assets Identify Goals of Affected Parties Build Succession Vehicle

6. 6 Building a Succession Team Owners (all owners) Successors Legal Counsel Tax Advisor

7. 7 Inventory Assets Identify Assets To Pass On Business Personal Earning Potential and Value Include Liabilities Full Disclosure

8. 8 Identify Needs and Goals Security Family harmony Reward Control Owners

9. 9 Identify Needs and Goals Successors What am I working for? How to plan for the future Expectations

10. 10 Build a Succession Vehicle Typical Vehicles Limited Partnerships Limited Liability Companies Corporations Trusts Wills

11. 11 Limited Partnerships Distribute ownership Retain control Business purpose Operating agreement Limits liability Tax considerations

12. 12 Limited Liability Companies Liability protection Business purpose Shared Control Operating agreement Tax Considerations

13. 13 Corporations More complicated than LLCs and LPs C VS S corporations Ownership restrictions (S) Dividend restrictions (S) Tax Considerations

14. 14 Trusts and Wills Trusts Bypass Probate Revocable Irrevocable Grantor Trustee Beneficiary Wills Miscellaneous assets Personal effects “Pour-over” wills.

15. 15 Other Succession Vehicles Mortgages Life Estates Charitable Remainder Trusts

16. 16 Miscellaneous Observations Avoid shared ownership Plan for the end of the ride Entities can survive multiple generations. Avoid conflicts of interest Seek professional help

17. 17 Costs Costs vary widely Attorney, Tax Advisor, Other Small estates as little as $1,000 Larger estates may take $10,000 or more Take it in steps, if necessary

18. 18 Real World Example Bob & Betty Johnson (55 years old) 1,200 acres, $6 million value NOI $120,000, lease value Three married sons, oldest (John) works on the farm

19. 19 Real World Example Issues Retirement Equal treatment of children Estate Taxes

20. 20 Real World Solution Documents and Entities Entities Johnson & Johnson Trust J&J LLC Johnson Family Limited Partnership John Johnson LLC Documents Will Operating Agreements Durable Power of Attorney Living Will

21. 21 Real World Solution Johnson & Johnson Trust Personal Assets (97%)Limited Partner Ownership (3%)General Partner Ownership

22. 22 Real World Solution Johnson & Johnson Trust Personal Assets 22% Limited Partner Ownership 75% Limited Partner Ownership Johnson Sons (3%)General Partner Ownership

23. 23 Real World Solution Johnson & Johnson Trust Johnson Farm Johnson Family Limited Partnership Personal Assets General Partner Interest (3%) Johnson Sons Limited Partner Interest (97%) J & J LLC

24. 24 Real World Solution Johnson Family LP Life estate John Johnson LLC leases farm General partners compensated with lease income Right to purchase remaining interest

25. 25 Johnson Cash Flows John Johnson, LLC Bob & Betty Living Expenses $80,000 Johnson Family Limited Partnership $50,000 Partnership Interest Purchase $30,000/Yr $40,000 FLP Investment Reserve Lease Income: $90,000/YR John Johnson

26. 26 Wrapping It Up Life estate expires John becomes general partner Purchases 50% interest 1/3 from cash reserve 2/3 using graduated mortgage Trust allows sons to avoid probate Pour-over will takes care of car

27. 27 Final Thoughts Start now Communicate Rely on professionals

28. 28 For More Information www.christmastreeriskmanagement.com Custom Ag Solutions –www.customagsolutions.comwww.customagsolutions.com –877-227-8094 –bcrosby@casnow.combcrosby@casnow.com