STAGE 3: GPS GOAL TRACKER TOOL
Great job on completing the farm estate assessment!
Based on your previous answers, we've identified several key areas to focus on when considering your estate and farm succession goals.
You can download and print these results at the bottom of the page. Then check off each that you want to pursue. Be sure to coordinate these results with the GPS Goal Setting Worksheet that you downloaded earlier.
FARM SUCCESSION STRATEGIES:
___ Based on the age range of the parents, it may be important to keep your planning flexible as things and your operation grows over time. This also means it will be important to review it frequently to make sure your plan grows with your operation.
___ Based on the age range of the parents, this may be an ideal time to update your planning. Your farm heir is probably old enough to be committed to the farm, but too young to be fully established to buy the others out without a solid plan.
___ Based on the age range of the parents, this may be a critical time to update your planning. A lot can still change, but you are probably closer to defining exactly how you want your farms distributed and coordinating with your retirement needs.
___ Based on the age range of the parents, you probably know by now who is farming and who is not. You also know how your heirs have handled challenges and opportunities in the past. Use this to fully craft a farm succession strategy that works for you. If you sold your farm to your farming heir today, how would you arrive at price and timing? Do your estate docs reflect the same terms?
___ Based on the age range of the parents, you may be limited on the number of available planning options. However, that just makes it more essential to properly coordinate the tools that are available.
___ Consider structuring common operating terms that can be agreed upon across the extended families, while still allowing each individual family to distribute their share to their kids as they see fit.
___ Include cross-purchase options on farm assets owned between extended families.
___ Identify the terms and conditions for a buyout or exit strategy from any farm entity that will cash flow for the farm heir.
___ Review the operating agreements for any farm entity and verify that there are no conflicts with any stipulations laid out in the will/trust for management control, operating terms, valuation, or buyout provisions.
___ Clearly define a valuation model for purchase or equalization strategies on any entities. Include any family discounts and/or recognition of lack of marketability, minority interests, and assumed tax liabilities.
___ Consider if any future growth of the entity should be split among all heirs, or just the farm heir if he/she is contributing to that growth.
___ Identify who should and shouldn't be allowable future owners and consider tiered buyouts between relatives vs. in-laws.
___ Create a clear path for who is to manage the entity and the terms and conditions of operation if the parent cannot fulfill the role of the manager.
___ Review the future impact on expansion and collateralization opportunities for the farm heir based on the current entity distribution plan.
___ Avoid distribution of the C-corp to the Off-Farm Heirs where they receive little to no functional use/value but could cause problems for the Farm Heir. Consider buyout and/or equalization strategies so the Farm Heir can own & control the operational assets.
___ Address how you specifically want the machinery to be handled through your estate documents in a way that cash flows for the farming heir. (Distribution method, purchase options, valuation, timing, etc.)
___ Address how you specifically want the livestock to be handled through your estate documents between the farm and off-farm heirs.
___ Talk to landlords about possibly including farm succession options for you or your farming heir in their estate strategies. There are ways to honor the landlords' family while protecting your land base.
___ Operational Consistency: Define the terms and conditions that reflect our intentions for rental options and management decisions on the farm if I/we become incapacitated.
___ Operational Consistency:
Update/Create the corresponding estate documents to allow the Farm Heir to continue the operation in the event that I/we become incapacitated.
___ Explore strategies for assigning rental and purchase options that are in line with your 'family value' rather than 'market value'.
___ Apply the same valuation method I/we would use on purchase prices and rent values today to the proper estate documents to reflect our wishes.
___ Protect the land base and cash flow margin so the farm land can stay whole or even multiply between generations rather than be divided.
___ Identify which farms are most critical for the farm heir to own, and explore options to offset that value to the off-farm heirs so they are treated fairly/equitably.
___ Explore strategies that avoid the problems of co-ownership between farming and off-farm heirs.
___ Explore strategies where all the heirs can own the farm together while still protecting the farming heir's interest in the operation.
___ Calculate the percentage of land equity the farm heir will have after the estate is distributed and determine if he/she will be able to qualify for a loan to buy the others out if needed.
___ Consider strategies to distribute off-farm assets (whole or in part) to the off-farm heirs so they can pursue their own interests, obtain liquidity, and perhaps a higher return outside the farm operation.
___ Explore strategies to transfer enough land equity to the farming heir so they will qualify for future loans (if needed) while still treating the off-farm heirs fairly/equitably.
___ Explore options for defining 'Fair' and 'Equal' in estate distribution. (Example: This could mean equal acres between heirs, equal value of total assets inherited, equal income potential, equal risk, equal opportunity, etc.)
___ Develop a strategy where any potential buyout or equalization strategies between the heirs will cash flow for the farming heir today, and after the parents pass away.
___ Be able to understand the farm estate goals, challenges, and solutions enough to comfortably communicate them to the family in the right context.
ESTATE STRATEGIES:
___ Get a plan in place so your estate can be administered based on your intentions, rather than your state's default laws for intestacy.
b) Evaluate the differences between a Planning Will and a Revocable Trust Agreement and implement the estate strategy that fits your situation best.___ Evaluate the differences between a Planning Will and a Revocable Trust Agreement and implement the estate strategy that fits your situation best.
___ Evaluate the differences between a Planning Will and a Revocable Trust Agreement and implement the estate strategy that fits your situation best.
___ Structure current estate strategies to maximize value (i.e. Sheltered assets after 1st death, qualification for discounts, qualification for special use valuation, advanced planning, etc.)
___ Learn more about Section 2032a Special Use Valuation, the benefit it may have on future estate tax consequences, and how to qualify for it.
___ Consider incorporating the Special Use Formula as a means to establish valuation methods for buy/sell agreements within the farm succession plan.
___ Run through a potential estate loss calculation to estimate any expenses due to estate tax, income tax, probate, final expenses, etc. and pursue options to mitigate the risk to the farm.
___ Review our estate documents to verify there will be operational consistency at each stage; incapacitation, after 1st death, and after 2nd death.
___ Learn how to structure powers of attorney, operating agreements, and/or trustee powers so it is less consequential who is filling that role. Protect anyone from 'self-dealing' or being 'out-voted' on anything outside the normal operation of our business.
___ Create/Update Healthcare Power of Attorney to define who can make medical decisions on my behalf if I cannot do so myself.
___ Quantify the potential risk for healthcare costs to disrupt the farm operation. Calculate the income gap and explore options to mitigate that risk beyond the typical Long Term Care policies.
___ Explore estate and ownership strategies to avoid ancillary probate (probate in multiple states) for current assets.
___ Learn the different ways to own assets and the impact it has on estate distribution probate.
___ Learn the strategies for coordinating asset ownership and beneficiary designations to complement the overall estate and farm succession goals.
___ Explore options for gifting assets without negatively impacting the farm succession plan, management control, income needs, or collateralization requirements.
