New England Farm Transfer Workshops

Bob ParsonsUniversity of Vermont

Mike SciabarrasiUniversity of Vermont

Demand - Program that Addressed Regional Education Needs on Farm Transfer Issues

• Aging farmers• Major concern of 40% of VT dairy farmers• Complicated by high real estate values • Concern in region to preserve farmland• Complex – 2 different issues

– Estate Planning

– Business transition

Result: Regionally Supported Project• Generously funded by the Northeast Center for

Risk Mgmt Education• Combined effort and cooperation: Extension of

Connecticut, Maine, New Hampshire, and Rhode Island

• Land For Good, Land Link – New England, Vermont, and Maine

• Cooperating attorneys• Moral: One state could not do the program

alone!

Workshop Agenda for “Transfer The Farm I” Workshop

• 1 day, 9:00 – 3:00

• Get the process started

• Communication and setting goals

• Retirement, estate & business basics

• Nuts & bolts – Legal aspects & methods

• Creative alternatives

• First-hand experience

Introduction Section

• Identify the issues

• “Farm Transfer” is not the issue

• Retirement, health care, business transition, fair vs. equitable, legal issues

• Use humor to set the tone

• Suggest different transfer plans

“No Plan” Plan

• Not planning to die• Going to take it with you• Intend to go out farming• Never, never, ever discuss with family• Surprise everyone at death!• No concept of “fair.”

UNH and UVM Cooperative Extension, 2006UNH and UVM Cooperative Extension, 2006

“I’m Gonna Do Something

Someday” Plan

• “I know just what I want to do”• “Someday, all this will be yours”• “Don’t worry, you will be taken care

of”

But nothing is ever written down! Or old plans never updated!

UNH and UVM Cooperative Extension, 2006UNH and UVM Cooperative Extension, 2006

Communication – Important Piece“Talk” is a 4 Letter Word!

• Speaker – Counselor who concentrates on farm families

• Stress the need of talking with family– Not necessarily agreement

• Exercise - Goals of each generation

• Aligning goals with the farm situation

Retirement & Transfer Basics

• View of the issues and considerations

• Retirement planning

• Health and income needs

• Implication of taxes

• Methods of transferring assets

• Business organizations

• Business transitions

Overview but not Detailed…

• Introduce and expose topics

• Participants think of their situation

• Address “fair” vs “equal”

• Quiz questions to generate discussion

• Examples and war stories– What works and what doesn’t

Legal Aspects of Transfers

• Attorney is essential• Opportunity for free legal questions!• Probate, estate, and taxes• Wills, inheritance, & heirs• Protecting assets • Conflict of interest between generations!

Key Points with Attorney

• Need lawyer with ag experience• Speaking ability in “everyday” verbiage• Familiar with state laws• Be careful of fishing for clients• Face it, some lawyers push different tools• Work with lawyer so they know what else is

being presented in the workshop• Allow plenty of time for questions

Creative Alternatives

• Land Link – bringing in non-family member

• Sell development rights

• Caution – state/trust personnel can really push easements w/out discussing down side!

First Hand Experience

• Participants scared/confused at this point

• Feel alone, not sure where to turn

• Farmer panel gives hope and confidence that transfer/transition plan can be achieved

• Folks willing to openly discuss

• Get multiple views– Parent, child, in-law

Farmer Panel Should Cover…

• What was their situation and goal

• What did they do

• How did they go about it

• How did it turn out for them

• Get success and horror stories

• Gives courage to move forward

So What Were the Results???

• 16 programs in 6 states 2004-2007

• 667 participants

• Age distributed: 10% < 35, 25% >65

• 53% male, 47% female

• 61% sole proprietor, 29% partnerships

• 71% have retirement account

• 27% wrote/updated will in past 5 yrs

People Liked the Program

• 95% Satisfied with the workshop

• 98% Satisfied with workshop organization

• Farmer Panel highest rated section

• Family Communication

• Legal Aspects – folks liked the lawyers!

Workshop Increased Understanding of the Issues…

• Communication - from 30% to 88% • Retirement planning - from 25% to 75%• Business transition- from 16% to 77%• Estate planning -from 20% to 80%• Note: on a scale of 1 to 5, answer 4 or 5

Conclusions from TTF-I

• Workshops very effective and popular

• Aids farmers in getting a handle on issues

• But comments left a desire for more…

So what to do next???

Primary Comments…

• People wanted info on transitions

• Type of business organization?• What should be in a business

agreement? • Want details on how to get

started!

Creation of Transfer the Farm II

• For farmers who are ready to “do something”• Provide more detailed program• Focus on business transition

Problem was…

What exactly to present and how to present it?

Follow-up visits??

Program Adopted in 2005

• Retirement income

• Medicaid and farm ownership

• Compare business organizations and trusts

• Ingredients of a business agreement

• Conclude with a decision case

Reference Material for Workshop

• Checklist for ingredients of LLC agreement• Limitations of LLC

– Does it provide limited liability?

– Preventing “piercing the veil”

• Checklist of post-LLC tasks

Points of Particular Interest

• Key elements of agreement for– Divorce– Control

• Passing ownership through the LLC

• Does it really protect against liability

Workshops Since 2005

• 9 workshops in 6 states

• 258 participants – 48% female

• 28% >65, 14% < 35

• 97% satisfied with workshop

• >90% satisfied with topics

• Lowest rated was the cases – 82%

Workshop Effectiveness

• Medicaid greatest area of interest

• Next–provisions of business agreements

• 95% say speakers were very effective

Follow-up Program with Participants Begun in 2006

• Set up farm visit with farmers • Cover cost of travel• Aid contacting professional (lawyer, acc’t)

– Provide $150 stipend

• Goal of 55 throughout New England– Met with over 40 families– One perplexing find – people are not asking for

stipend!

So What Have We Learned?

• Farm transfer remains major concern• Various issues

– Business transition– Estate planning to reduce taxes

• Need assistance of professionals• Task complex but can be accomplished• New England

– Must take regional approach

Conclusion…

There are many ways to get there But all require on basic step…

…at some point you must stop procrastinating and put a plan in action!!!