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Sandwich Generation

David GoellerFarm Transition

Specialist402 450 2420

dgoeller28@gmail.com

Dept. of Agricultural EconomicsUniversity of Nebraska-Lincoln

Need For Personal Legal Advice

The information in this presentation and accompanying material is provided for educational purposes only. It is not a substitute for individual legal consultation.

Objective

Not selling anything!! Not to tell you what to do!!

Organize your thoughts and help you think about…..

“Right Tools for the Job!!”

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Right Tool for the Job?

Unique position!!They won’t give up controlOld fashioned ideasWon’t change their waysSlave drivers!They’re the only ones that can run this place!They don’t plan to ever retireWe never discuss anythingI think they will farm forever…..

Right Tool for the Job?

Unique position!!They aren’t very responsibleThis place wouldn’t last a week without meThey just aren’t willing to put in the workSpending too much on living expenses!They’re pushing us outWill we ever be able to afford to retire?Quits a 5 pm so he can see family, sports etcCan’t afford for them to loose it. All we have

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FACTS

FEELINGS

PERCEPTIONS

Solving the Problem??• Most unsolved problems remain unsolved if we don’t

know where to start!!

PLANNING POCESSTOOLS

Farm Management Planning Process

Business Succession Planning Process

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ProcessOverview

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Where is the farm now?

• Financial Tools• Balance sheet• Ratios• Schedule F Tax Return (Income Statement)

• Trend Sheet (How did you get here?)• Cash Flow Projection• Enterprise analysis/breakeven• Family living costs $$$$$

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Where is the farm now?

• Production Data (Big 8)

• 1. Yield information• Bushels/acre• Lbs/head/day gain• % Death loss

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Where is the farm now?

• Production Data (Big 8)

• 2. Input costs? $$$• Seed, fertilizer, chemicals, etc/acre• Feed, veterinary, etc/head• Machine Hire?• Hired labor?

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Where is the farm now?

• Production Data (Big 8)

• 3. Machinery costs/acre? $$$• Repairs• Depreciation

• 4. Rent/acre or /head• 5. Marketing plan?????

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Where is the farm now?

• Production Data (Big 8)

• 6. Risk Management plan? $$$• Insurance

• Crop

• Liability• Health and life

• Human risks?

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Where is the farm now?

• Production Data (Big 8)

• 7. Debt Service & RE taxes/acre• Principal

• Interest

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Where is the farm now?

• Production Data (Big 8)

• 8. Family Living/year$$$$$$• Health insurance

• Toys• Off farm job

• Credit card debt???• Interest

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Where is the farm now?

RECORDS…RECORDS RECORDS???

How can you manage if you can’t measure?

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Where do you want to be?

Goals

• Older Generation• Retirement lifestyle

(money needed)

• Residence

• Nonfarm heirs• Fair vs Equal

• Contribution

• Compensation

• Younger Generation• Lifestyle (money needed)

• Growth of business

• Attitude toward debt

• Ownership vs. renting

• Family time vs. work

Start by Communicating

• Effectively communicate

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Where do you want to be?

•Goals……..Vision.……..Values…....…Objectives........Priorities?

•Stakeholders?• Who needs to be involved/?

• Family members?• Business partners?

•Time table. By when?

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How do you get there?

•Planning Process Models• S.O.C.S. Model• Situation• Options• Consequences & Costs• Solution

Decision Making Process

• Explore the options• S.O.C.S. Model

• Situation • Where are we now?

• Financials• Production• Management• Family Living Costs• Other

• Can we ID the problem or problems?

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Decision Making Process

• Explore the options• S.O.C.S. Model

• Options

• Start Brain Storming…Initially, anything goes

• Consider all options including doing nothing

• If changes are necessary, what would they be willing to change? Prioritize?

• Begin to help THEM Identify THEIR realistic alternatives/options

Decision Making Process• Explore the options

• S.O.C.S. Model• Options (cont.)

• Narrow it down to the top 3 or 4 and eventually the top 2

• Is there more information that needs to be gathered?

• Tax Consequences

• Family members opinions

• Other???

• TO DO LIST….What….When….Who….$

Decision Making Process• Explore the options

• S.O.C.S. Model

• Consequences & Cost$$$

• Evaluate the alternatives. Good and bad.

• Look at costs and benefits of various options

• Financial viability…CASH FLOW?

• Most decisions are not made on financial information only

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Decision Making Process• Explore the options

• S.O.C.S. Model

• Solution

• Help them Create THEIR PLAN

• Step number 1 etc. What’s the firsthurdle in their race?

• Action Plan/To Do List• What will happen?

• When will it be done?

• Who is responsible to make sure it happens?

• How much will it cost?

To Do List

What? needs When? Who? is to be done? Responsible?

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How do you get there?

• Identify the specific problem

•Brain Storm options

•Evaluate costs and benefits

•Create an Action Plan

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Resources

• Joe M. Hawbaker, Hawbaker Law Office• Phone: 402-558-3540

• Email: jmhawbaker@gmail.com

• David Goeller, Farm Transition Specialist • Phone: 402-450-2420

• Email: dgoeller28@gmail.com

• Nebraska Farm Hotline• Phone 800-464-0258

FARM

Business Assets

Financial

Viability

Succession

Plan

Goals

Retirement

Plan

Estate

PlanEstate

Plan

SUCCESSION PLANNING POCESS

1. Do you want your business to continue beyond your lifetime?

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SUCCESSION PLANNING PROCESS

2. Have you identified a successor?

Job Description• If you where to write a job description for the

successor of your business what would it say regarding:• Starting and ending time each day?

• Breaks and lunch?

• Job responsibilities?

• Pay?

• Benefits?

• Vacation?

• Advancement opportunities? When?

• Evaluation Criteria?

SUCCESSION PLANNING PROCESS

3. Goal SettingWhere do you want to be?

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Goals

• Older Generation• Retirement lifestyle

(money needed)

• Residence

• Nonfarm heirs• Fair vs Equal

• Contribution

• Compensation

• Younger Generation• Lifestyle (money needed)

• Growth of business

• Attitude toward debt

• Ownership vs. renting

• Family time vs. work

Start by Communicating

• Effectively communicate

SUCCESSION PLANNING PROCESS

3. Goal SettingWhere do you want to be?

Family vs Business

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SUCCESSION PLANNING PROCESS

3. Goal SettingWhere do you want to be?

Family vs BusinessLong vs Short Term

SUCCESSION PLANNING PROCESS

4. Will you pass your business on as a “Super Farm” or a “Spin Off”?

Business Succession Plan

TWO BASIC CHOICES

• Multi-Person Arrangement

• Spin-Off Arrangement

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MULTI-PERSON APPROACH

P C

Business

P & C

Business

P

Business

C

SPIN-OFF APPROACH

Business Business

C

C

C

P

P

Business

P

Business

SUCCESSION PLANNING PROCESS

5. What is the “Target” period for transitioning the business management?

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Business Succession Plan TRANSFER PERIOD

owner

successor

time

Short Transfer Period

Business Succession Plan TRANSFER PERIOD

Long Transfer Period

owner

successor

time

Management Transfer

•Phased plan approach•#1 Owner make decisions (Mentor)•#2 Owner and successor make decisions together•#3 Successor make decisions

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Management Transfer

•Three most important factors to a successful business:•Management

•Management

•Management

Business Succession Plan The Transfer Stages

Testing

Commitment

Established

Withdrawal

Business Succession PlanTesting Commitment Established Withdrawal

Labor

Timeline

Income

Timeline

Management

Timeline

Ownership

Timeline

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Beginning Farmer Tax IncentiveNext-Gen

•Renting Agricultural Assets• Landlord

• Tax Credit to Agricultural Landlord• 10% Cash Rent

• 15% Share Rent

• Beginner• Personal Property Tax Exemption-Beginner

• $500 to reimburse education requirement

• 3 year lease

Beginning Farmer Tax Incentive

• Eligibility - Beginners• Net Worth under $200,000• Farmed for less than 10 of last 15 years• Day-to-day management & labor• Financial management education class

Eligibility – Owners• Interest in Agricultural Assets in Nebraska

Beginning Farmer Tax Incentive• 160 Acres @ $300/ac Cash Rent = $48,000

• 10% = $4,800 Tax Credit

• 160 Acres @ 200 Bu/ac @ $4.00/bu = $128,000 gross income

• 50/50 share rent $64,000 x 15% = $9,600 Tax Credit

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Beginning Farmer Tax Incentive

• Eligibility - Owners• Interest in Agricultural Assets in Nebraska

• CONTACT INFORMATION

•800-753-9396• WWW.AGR.NE.GOV

Resources

• Joe M. Hawbaker, Hawbaker Law Office• Phone: 402-558-3540

• Email: jmhawbaker@gmail.com

• David Goeller, Farm Transition Specialist • Phone: 402-450-2420

• Email: dgoeller28@gmail.com

• Nebraska Farm Hotline• Phone 800-464-0258

Articles Available 1-800-464-0258

Estate Questionnaire Probate

Neb. Inheritance Tax Federal Transfer Taxes

Health care POA Durable POAs

Intestacy Charitable Giving

Future Interests & LE

Deed

Joint Tenancy & Tenancy

in Common

Options & Preemptive

Rights

Spousal Tax Planning &

Portability

Personal Representative PR Checklist

Special Use Valuation Partition

The Will Transfer on Death Deeds

Trusts Buy-Sell Agreements

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