We have always prioritized the safety of our clients, and in these uncertain times, this is no different. That’s why we are practicing and enforcing best practices for social distancing and sanitizing in the midst of COVID-19.

Close

Estate Planning Blog

Serving Clients Throughout North Central Missouri

family farm planning

Preserving Your Legacy: Estate Planning for Landowners

September 25, 2024

Owning land is more than just an investment; it connects a source of livelihood to a cherished family legacy. As a landowner, planning for the future and ensuring that your property is preserved and passed down to future generations is essential. Based on the Central Trust Company article, “Estate Planning For Landowners,” we explore how estate planning can help landowners safeguard their legacy and ensure continuity for their family farm or ranch.

What are the Key Considerations for Landowners Planning Their Legacy?

Many landowners believe that their property represents more than just acreage. It’s a symbol of family heritage and tradition. Estate planning allows you to preserve this legacy by outlining how your land will be managed and passed down. Making thoughtful decisions about inheritance and land use ensures that your family heritage lasts for years.

If the land is used for ranching for farming, the continuity of farm operations is also essential for the livelihood of family members and the sustainability of the land. Special considerations regarding livestock, equipment and other expensive assets are required to prevent unintended consequences.

While many landowners choose to pass on ownership through beneficiary designations, such as Payable on Death (POD) or beneficiary deeds or even adding family members as joint owners, the property can become exposed to creditors and liabilities through these methods.  In contrast, comprehensive estate planning guards the land from harmful actors and enables you to address critical issues, such as disability or death of the principal owner, ensuring that operations can continue seamlessly, even in unforeseen circumstances. Developing a comprehensive plan can safeguard the future of your family farm or ranch.

What are the Complexities to Address in Landowner Estate Planning?

Given the complexities of estate planning for landowners, it’s crucial to work with a knowledgeable estate planning attorney in your area. An estate planning attorney can help you design a customized plan for your goals and concerns. For example, you can choose strategies that protect portions of your land and provide income from other portions.

Tax considerations play a significant role in landowners’ estate planning. Changes in tax laws can impact the financial implications of transferring property to future generations. An experienced estate planning attorney can help you explore tax-efficient strategies, such as conservation easements, to minimize estate tax burdens and maximize the value of your legacy.

Key Estate Planning For Landowners Takeaways:

  • Protect Family Heritage: Protect your family’s legacy for future generations.
  • Preserve Land Value: Strategize land use for maximum land value.
  • Seek Professional Guidance: Engage an estate planning attorney to develop a comprehensive plan tailored to your needs.

Conclusion

As a landowner, your property is a testament to your family’s heritage and a source of livelihood for future generations. Engage in thoughtful estate planning with our legal team to preserve your legacy and maximize the value of your land for your heirs.

Please visit our website www.MoTrustLaw.com for more information on estate planning for family farms.

Reference: Central Trust Company (Aug. 25, 2022) “Estate Planning For Landowners,”

Retirement Planning

Navigating Farm and Ranch Succession Planning

September 23, 2024

Embarking on an estate planning journey for your family farm is akin to nurturing the legacy you’ve built over generations. From safeguarding agricultural assets to fostering smooth succession transitions, the decisions you make today will shape the future of your farm or ranch. Based on EstatePlanning.com’s article, “Estate Planning and Succession Planning for a Family Farm,” we examine the nuances of succession strategies for farmers and ranchers, strategies to consider and why it’s important to plan now.

Why Is Farm and Ranch Succession Planning so Complex?

There are unique tax and asset categories to consider in farm and ranch succession planning. For example, farm assets may require the owner to file a federal estate tax return to lower the taxable value of their estate. The assets included in farm and ranch estates are categorized based on business, retirement and inheritance. Farm and ranch owners creating a succession plan should work with an experienced estate planning attorney to navigate this nuanced process.

What are Farm and Ranch Succession Planning Strategies?

Farm and ranch assets encompass a diverse range of categories, from business infrastructure to retirement funds and inheritance prospects. Reinvestment strategies play a pivotal role in the following:

  • Sustainable Business: Reinvesting profits into the farm bolsters its capacity and modernization efforts, ensuring long-term viability.
  • Balanced Asset Allocation: Allocating between business, retirement and inheritance assets fosters financial equilibrium and succession preparedness.
  • Sensible Legacy Preservation: Deciding based on the emotional and practical significance of the farm or ranch.

Prioritizing Succession Planning: Balancing Business and Inheritance Goals

Succession planning is essential for farm and ranch owners aiming to ensure a seamless transition to the next generation. Key considerations include:

  • Early Planning: Anticipating succession needs early allows for thoughtful balancing of business, retirement and inheritance goals.
  • Strategic Decisions: Implementing fair and practical distribution decisions based on guiding principles, such as proportional equality and need-based considerations.
  • Good Communication: Communicating clearly with family members fosters understanding.

Leveraging Estate Planning: Crafting a Sustainable Future

Estate planning empowers farm and ranch owners to secure their family’s future, while preserving their legacy. Essential strategies include:

  • Customized Plans: Tailoring estate plans to reflect the farm’s financial capacity and long-term goals.
  • Professional Guidance: Collaborating with experienced estate planning attorneys to navigate complex decisions and structure inheritable assets effectively.
  • Timely Action: Initiating estate planning early allows for proactive adjustments to evolving challenges and shifting family dynamics.

Key Succession Planning for Farm and Ranch Owners Takeaways:

  • Plan Proactively: Early estate planning facilitates smoother transitions and preserves the farm’s legacy for future generations.
  • Prioritize Planning: Solid strategies balance business sustainability and inheritance goals for long-term success.
  • Communicate Effectively: Transparent communication with family members minimizes potential conflicts, ensuring a harmonious transition.

Conclusion

Succession planning for family farms and ranches embodies the intersection of financial stewardship and emotional legacy preservation.  Let our estate planning team help guide you through the complexities of planning for the next generation as a farm or ranch owner by prioritizing proactive planning, balancing asset allocation and fostering open communication with confidence and clarity.

Reference: EstatePlanning.com (Nov. 9, 2023) “Estate Planning and Succession Planning for a Family Farm,”

Retirement Planning

Navigating Business Succession: A Comprehensive Approach to Business and Exit Planning

January 26, 2024

As business owners focus on day-to-day operations and growth, the thought of leaving or selling their business often takes a backseat. However, as Frank Fantozzi, a certified exit planning adviser, emphasizes, “for most owners, the business is their largest asset.” This makes succession planning an exit strategy and a crucial part of overall business planning.

The Importance of Early Succession Planning in Business Strategy

Succession planning should be an integral part of a business’s foundation. Delaying this process can lead to complications, especially when unforeseen circumstances like the “5Ds” – death, disability, divorce, disagreement and distress – arise. Early planning ensures that the business remains stable, and its value is maximized, regardless of market conditions.

Core Elements of Business Succession Planning

Strategic Business Planning and Succession

Aligning business goals with a succession plan is vital. This alignment helps identify potential successors early and integrate their development into the business’s growth strategy. As Fantozzi notes, understanding where the business is and where it needs to go is crucial in this process.

Owner Readiness and Transition

Owners must prepare both emotionally and financially for their exit. This preparation involves assessing personal financial needs post-exit and ensuring that the business can meet these needs. Fantozzi points out the importance of understanding one’s cost of living without the business and preparing accordingly.

Business Valuation and Market Readiness

Regular business valuation is key in succession planning. It’s not just about the company’s size but being the best in its class. Fantozzi suggests that achieving ‘Best in Class’ status can significantly impact the value received for the business.

Succession Planning as a Tool for Business Growth and Stability

Effective succession planning is not just about preparing for an exit; it’s a growth strategy. It ensures leadership continuity, maintains business values and can be a selling point to investors and clients seeking stability in their partnerships.

Legal and Financial Considerations in Succession Planning

Succession planning involves various legal and financial considerations. These include the transfer structure, tax implications and ensuring legal compliance. Professional advisors play a crucial role in navigating these complexities.

Challenges and Solutions in Succession Planning

Choosing the right successor, especially in family businesses, can be challenging. Solutions include establishing clear criteria for succession, involving external advisors for unbiased perspectives and considering non-family executives, where appropriate.

Conclusion

Succession planning is a dynamic and ongoing element of business planning. It requires regular review and adjustment as the business and its environment evolve. As Fantozzi concludes, “Your exit strategy connects the dots between business success and a life well lived.” Business owners are encouraged to view succession planning as a vital part of their life cycle, ensuring a legacy that endures and thrives beyond their tenure.

Retirement Planning

How Can I Successfully Transfer My Business to My Children?

October 18, 2023

According to ITR Economics, out of the 77 million Baby Boomers in the U.S., an estimated 12 million are privately held business owners.

As ownership of businesses for those born between 1946-1964 is transferred to the next generation, an estimated $10 trillion worth of business assets is expected to be transferred in the coming years.

AZ Big Media’s recent article, “Passing the torch: Considerations for a successful generational business transfer,” explains the best way to have a successful business transfer.

Develop a Strategic Plan.  A successful generational business transfer takes time and planning. You should begin the planning process way in advance of the change in leadership. This can give a family time to define what the future of the company looks like. Determine what technology, human resources, and capital requirements the company needs to be successful in the short and long term. Ensure that the current and future owner’s visions are communicated. If both visions aren’t in alignment, discuss what the future for the business may look like. Balancing long-standing business practices with new changes can mean a sustainable and successful business. Begin integrating the future leader into day-to-day business operations before transitioning. Establishing a clear transfer of duties and mapping out a timeline can help with a smooth transfer process.

Get Finances in Order. Preparing business finances in advance of a generational transfer is critical. The current business owner may consider setting up a grantor-retained annuity trust for their successor. An experienced estate planning attorney can help to create this trust, which earns annual income for the beneficiary receiving the funds with minimal or no gift tax liability upon expiration. Family members may also consider transferring their business to the successor through an installment sale, which is a sale of property where at least one payment is received after the tax year in which the sale occurs. Note that an installment sale could mean a tax benefit for the seller because the overall tax liability is spread out over time rather than all at once during the business transfer. Once you decide on the preferred financial path to conduct the transfer, look at the company’s cash flow and other financial projections. List the projected expenses, liabilities and potential taxes owed, and then identify sources of liquidity to pay them.

Work With Financial Partners. If not already in place, look to assemble a team of trusted advisors, including a CPA, attorney, banker, and wealth advisor. This team can work through the financial aspects of any generational business transfer.

Transferring a business is a major family event involving potentially tough conversations and decisions. This can be a complex process. However, with proper planning, it also has the potential to be an opportunity to achieve new growth and elevate long-standing family business goals.

Reference: AZ Big Media (June 8, 2023) “Passing the torch: Considerations for a successful generational business transfer”

Retirement Planning

Succession Planning for Farm Transition and Estate Planning

August 10, 2021

If you think it’s bad that 60% of farmers don’t have a will, here’s what’s even worse: 89% don’t have a farm transfer plan, as reported in the recent article “10 Farm Transition and Estate Planning Mistakes” from Farm Journal’s Pork Business. Here are the ten most commonly made mistakes farmers make. Substitute the word “family-owned business” for farm and the problems created are identical.

Procrastination. Just as production methods have to be updated, so does estate planning. People wait until the perfect time to create the perfect plan, but life doesn’t work that way. Having a plan of some kind is better than none at all. If you die with no plan, your family gets to clean up the mess.

Failing to plan for substitute decision-making and health care directives. Everyone should have power of attorney and health care directive planning. A business or farm that requires your day-in-day-out supervision and decision making could die with you. Name a power of attorney, name an alternate POA and have every detail of operations spelled out. You can have a different person to act as your agent for running the farm and another to make health care decisions, or the same person can take on these responsibilities. Consult with an estate planning attorney to be sure your documents reflect your wishes and speak with family members.

Failing to communicate, early and often. There’s no room for secrecy, if you want your farm or family business to transfer successfully to the next generation. Schedule family meetings on a regular basis, establish agendas, take minutes and consider having an outsider serve as a meeting facilitator.

Treating everyone equally does not fit every situation. If some family members work and live on the farm and others work and live elsewhere, their roles in the future of the farm will be different. An estate planning attorney familiar with farm families will be able to give you suggestions on how to address this.

Not inventorying assets and liabilities. Real property includes land, buildings, fencing, livestock, equipment and bank accounts. Succession planning requires a complete inventory and valuation of all assets. Check on how property is titled to be sure land you intend to leave to children is not owned by someone else. Don’t neglect liabilities. When you pass down the farm, will your children also inherit debt? Everyone needs to know what is owned and what is owed.

Making decisions based on incorrect information. If you aren’t familiar with your state’s estate tax laws, you might be handing down a different sized estate than you think. Here’s an example: in Iowa, there is no inheritance tax due on shares left to a surviving spouse, lineal descendants or charitable, religious, or educational institutions. If you live in Iowa, do you have an estate plan that takes this into consideration? Do you know what taxes will be owed, and how they will be paid?

Lack of liquidity. Death is expensive. Cash may be needed to keep the business going between the date of death and the settling of the estate. It is also important to consider who will pay for the funeral, and how? Life insurance is one option.

Disorganization. Making your loved ones go through a post-mortem scavenger hunt is unkind. Business records should be well-organized. Tell the appropriate people where important records can be found. Walk them through everything, including online accounts. Consider using an old-fashioned three-ring binder system. In times of great stress, organization is appreciated.

No team of professionals to provide experience and expertise. The saying “it takes a village” applies to estate planning and farm succession. An accountant, estate planning attorney and financial advisor will more than pay for their services. Without them, your family may be left guessing about the future of the farm and the family.

Thinking your plan is done at any point in time. Like estate planning, succession planning is never really finished. Laws change, relationships change and family farms go through changes. An estate plan is not a one-and-done event. It needs to be reviewed and refreshed every few years.

Reference: Farm Journal’s Pork Business (June 28, 2021) “10 Farm Transition and Estate Planning Mistakes”

 

estate planning

What Could Proposed Estate Tax Bill Mean to You?

April 27, 2021

U.S. Sen. Bernie Sanders has released proposed legislation named “For the 99.5%” Act. If passed in its present form, the legislation would bring estate tax exemptions back to the 2009 thresholds of $3.5 million per individual and $7 million per married couple. Exemptions are currently $11.7 million and $23.4 million, as reported by Think Advisor in a recent article “Sen. Bernie Sanders Introduces Estate Tax Bill.”

Larger estates would also be subject to higher tax rates. The current 40% tax rate would be raised to 45% and taxable estates larger than $10 million would be taxed at 50%, amounts greater than $50 million at 55% and any estates valued at greater than $1 billion would be taxed at 65%.

The same rates would apply for all gift taxes, for which the threshold would be lowered to $1 million.

Sanders spoke at a Senate Budget Hearing committee, stating that his bill was designed to have the families of the “millionaire class not only not get a tax break but start paying their fair share of taxes.”

Another bill introduced by Sanders would prevent corporations from shifting profits offshore to avoid paying U.S. taxes and restoring the top corporate rate to 35%, where it has been since 2016.

In contrast, Senators John Thune, South Dakota (R) and John Kennedy, Louisiana (R), introduced legislation in early March to repeal the estate tax entirely.

Frank Clemente, executive director for Americans for Tax Fairness, said the tax plan released by President Biden during his campaign also tracked the 2009 estate tax levels that are the basis of Sanders’ bill, but because of the higher tax brackets for larger estates, his group believes the Sanders bill would raise about twice as much revenue as the Biden plan.

History teaches us that there is a long distance between the time that a bill is introduced, and many changes are made as proposed legislation makes its way through the law-making process. In this case, it can be safely said that there will be changes to the tax and estate laws, and that may be the only sure thing.

Now is a good time to review your estate plan, if these federal estate changes will have an impact on your family’s wealth. Familiarity with your current estate plan and staying in touch with your estate planning attorney, who will also be watching what Congress does in the coming months, will allow you to be prepared for changes to the tax planning aspect of your estate plan in the near or distant future.

Reference: Think Advisor (March 25, 2021) “Sen. Bernie Sanders Introduces Estate Tax Bill”

 

Retirement Planning

What Is ‘Whole Farm Planning?’

April 22, 2021

Farm families should adopt a whole farm planning approach, when they develop strategies for the future success of their business. The whole farm approach lets families look at the internal structure of their business and then develop business, retirement, transition, estate and investment plans that work in harmony.

Ohio’s Country Journal’s recent article entitled “Whole farm planning” says that in the middle of most farms and agricultural businesses is the family unit, and valuable lessons can be learned by all the generations involved, by examining past successes and disappointments. The underlying values and goals of the family have a significant impact on the way in which family members treat each other and employees and make business decisions.

The analysis of the current state of a farm should also be done to determine the physical, fiscal and personnel status of the business. The operation’s efficiency should be examined and  any available resources that aren’t currently being utilized should be identified. The farm’s profitability, business structure, operating procedures and employee management should also be reviewed. It’s also helpful for the management team to pinpoint external influences that could affect the business in the future, such as governmental, political, economic, environmental, social or technological elements.

Once a family has finished its internal analysis, they can continue the planning process by developing business, retirement, transition, estate and investment plans. These plans all will need to work in concert to ensure the long-term viability of the business.

Business Plan. A comprehensive business plan helps the family develop a plan of action for production and operation practices, and also helps develop plans for the financial, marketing, personnel and risk-management sectors of the business.

Retirement plan. A strategy to help each business member meet his or her expected retirement needs should be created. The two main retirement issues to look at are the amount of money each family member needs for retirement and the farm’s obligation to the retirees.

Transition plan. This plan ensures that the business has the resources to continue for future generations. This helps the family examine its current and future situations, then develop a plan to transfer the business to the next generation.

Estate Plan. This entails determining how the farm assets and debts will be distributed upon the death of the principal operators. This plan, along with the transition plan, helps to address the way in which the off-farm heirs can be treated fairly, without jeopardizing the future of the farming heir.

Investment plan. The primary investments made by farm families are typically made in land, machinery. and livestock. Investments let farm families to save for future education or retirement needs and permit investment diversification.

Reference: Ohio’s Country Journal (Feb. 11, 2021) “Whole farm planning”

 

Search
SUBSCRIBE!

RECENT POSTS
Categories

Contact Us

If you have a question, a comment, or simply want to have a conversation and explore how we can help, we’d love to hear from you.
To prioritize our client safety we are offering meetings by phone, Zoom and in our office.

Facebook-square Twitter-square Linkedin Rss

IMS-Logo-Sig
Powered By

Remember: The choice of an attorney is an important decision and should not be based solely upon advertisements.
Copyright © O’Loughlin Law Firm LLC. All rights reserved. Some artwork provided under license agreement.