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

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time for a change on the family farm

Time for a Change on the Family Farm

Oklahoma State University

J.C. Hobbs, Area Extension Agricultural Economics Specialist

Lori Shipman, Extension Associate

National Extension Risk Management Conference

March 26-27, 2003

history
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.
objectives
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
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

Time for a ChangeProgram Topics
goals
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.
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.

Estate Planning Issues
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.

Financial Inventory
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

Retirement Income
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

Shifting Ownership & Asset Transfer Alternatives
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

Shifting Control &Compensation
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”.

Investing Off-Farm
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

Insurance
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

Advisory Team
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)

Communications
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

Program Delivery
cost of program
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
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.”

Impact
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

Follow-up
new approach
New Approach
  • Website and CD
    • Video streamed presentations
    • Links to fact sheets and other valuable information

www.agecon.okstate.edu/TFAC

questions

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