Sandwich Generation David Goeller Farm Transition Specialist 402 450 2420 dgoeller28@gmail.com Dept. of Agricultural Economics University 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!! ” 1
Right Tool for the Job? Unique position!! They won’t give up control Old fashioned ideas Won’t change their ways Slave drivers! They’re the only ones that can run this place! They don’t plan to ever retire We never discuss anything I think they will farm forever….. Right Tool for the Job? Unique position!! They aren’t very responsible This place wouldn’t last a week without me They just aren’t willing to put in the work Spending too much on living expenses! They’re pushing us out Will we ever be able to afford to retire? Quits a 5 pm so he can see family, sports etc Can’t afford for them to loose it. All we have 2
FACTS FEELINGS PERCEPTIONS Solving the Problem?? • Most unsolved problems remain unsolved if we don’t know where to start!! PLANNING POCESS TOOLS Farm Management Planning Process Business Succession Planning Process 3
Process Overview 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 $$$$$ 11 Where is the farm now? • Production Data (Big 8) • 1. Yield information • Bushels/acre • Lbs/head/day gain • % Death loss 12 4
Where is the farm now? • Production Data (Big 8) • 2. Input costs? $$$ • Seed, fertilizer, chemicals, etc/acre • Feed, veterinary, etc/head • Machine Hire? • Hired labor? 13 Where is the farm now? • Production Data (Big 8) • 3. Machinery costs/acre? $$$ • Repairs • Depreciation • 4. Rent/acre or /head • 5. Marketing plan????? 14 Where is the farm now? • Production Data (Big 8) • 6. Risk Management plan? $$$ • Insurance • Crop • Liability • Health and life • Human risks? 15 5
Where is the farm now? • Production Data (Big 8) • 7. Debt Service & RE taxes/acre • Principal • Interest 16 Where is the farm now? • Production Data (Big 8) • 8. Family Living/year$$$$$$ • Health insurance • Toys • Off farm job • Credit card debt??? • Interest 17 Where is the farm now? RECORDS…RECORDS RECORDS??? How can you manage if you can’t measure? 18 6
Where do you want to be? 19 Go Goals ls • Older Generation • Younger Generation • Retirement lifestyle • Lifestyle (money needed) (money needed) • Growth of business • Residence • Attitude toward debt • Nonfarm heirs • Ownership vs. renting • Fair vs Equal • Family time vs. work • Contribution • Compensation Start by Communicating • Effectively communicate 7
Where do you want to be? • Goals ……..Vision.……..Values…....…Objectives........Pr iorities? • Stakeholders? • Who needs to be involved/? • Family members? • Business partners? • Time table. By when? 22 How do you get there? • Planning Process Models • S.O.C.S. Model • Situation • Options • Consequences & Costs • Solution 23 Decision Making Process • Explore the options • S.O.C.S. Model • Situation • Where are we now? • Financials • Production • Management • Family Living Costs • Other • Can we ID the problem or problems? 8
Decision Making Process • Explore the options • S.O.C.S. Model • Options • Start Brain Storming…Initially , anything goes • Consider all options including doing nothing • If changes are necessary, what would they be willing to change? Prioritize? • Begin to help THEM Identify THEIR realistic alternatives/options Decision Making Process • Explore the options • S.O.C.S. Model • Options (cont.) • Narrow it down to the top 3 or 4 and eventually the top 2 • Is there more information that needs to be gathered? • Tax Consequences • Family members opinions • Other??? • TO DO LIST ….What….When….Who….$ Decision Making Process • Explore the options • S.O.C.S. Model • Consequences & Cost$$$ • 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 9
Decision Making Process • Explore the options • S.O.C.S. Model • Solution • Help them Create THEIR PLAN • Step number 1 etc. What’s the first hurdle 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? How do you get there? • Identify the specific problem • Brain Storm options • Evaluate costs and benefits • Create an Action Plan 30 10
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 Goals Viability Succession Plan Retirement Plan Estate Estate Plan Plan SUC UCCE CESSION ON PLANNING POC OCESS 1. Do you want your business to continue beyond your lifetime? 11
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? SUC UCCE CESSION ON PLANNING PROC OCESS 3. Goal Setting Where do you want to be? 12
Goals Go ls • Older Generation • Younger Generation • Retirement lifestyle • Lifestyle (money needed) (money needed) • Growth of business • Residence • Attitude toward debt • Nonfarm heirs • Ownership vs. renting • Fair vs Equal • Family time vs. work • Contribution • Compensation Start by Communicating • Effectively communicate SUC UCCE CESSION ON PLANNING PROC OCESS 3. Goal Setting Where do you want to be? Family vs Business 13
SUC UCCE CESSION ON PLANNING PROC OCESS 3. Goal Setting Where do you want to be? Family vs Business Long vs Short Term SUC UCCE CESSION ON PLAN LANNING PROCESS 4. Will you pass your business on as a “Super Farm” or a “Spin Off”? Bu Busin iness Su Succe ccession Plan TWO BASIC CHOICES • Multi-Person Arrangement • Spin-Off Arrangement 14
MULTI-PERSON APPROACH P C Business P & C Business P C Business SPIN-OFF APPROACH P C Business P C Business Business P C Business SUC UCCE CESSION ON PLANNING PROC OCESS 5. What is the “Target” period for transitioning the business management? 15
Business Succession Plan TRANSFER PERIOD Short Transfer Period owner successor time 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 16
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 Plan Testing Commitment Established Withdrawal Labor Timeline Income Timeline Management Timeline Ownership Timeline 17
Beginning Farmer Tax Incentive Next-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 18
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