Matthew A. Bryan, Sr. December, 2017 5 ESSENTIAL STEPS FOR A - - PDF document

5 ESSENTIAL STEPS FOR A SUCCESSFUL RANCH PLAN

Matthew A. Bryan, Sr. December, 2017

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5 ESSENTIAL STEPS FOR A SUCCESSFUL RANCH PLAN

Matthew A. Bryan, Sr.

Introduction I believe in building strong families that also build multi-generational wealth. “Strong families” and “wealth” are key concepts warranting their own separate discussion. “Strong” means more than “wealthy” and “wealthy” means more than cash, mutual funds, land or cows. I think that ideal can be attained, or at least approached, more often than it is, with proper planning. My ideas in this paper are premised on this basic belief. I have several reasons for my belief in building strong families that build multi-generational wealth, none of which are relevant to why you want to pass on your ranch. Perhaps you haven’t thought through the why, you just know that it seems to you like just ranching for as long as your health permits it, eventually dying, and then letting whomever the legislature has decided for you off your ranch and go buy nice new trucks, and maybe subsidize the good people in Washington D.C. and Helena seems like a bad idea. Assuming, then, you want your life’s work is bigger than just you, and too important to leave in the hands of politicians, I offer the following steps for your consideration. Step One: Clone Yourself. The most important part of planning for continuity of a ranch is the development of those who will come next. You know your herds, but do you know your people? If you haven’t done this, you can start now. Don’t give up just because your children are grown and are not prepared, or interested in becoming prepared, to take over the reins. If your own children, grandchildren or spouse have neither the ability, nor the desire to carry on the work, then why not look to an employee, another family, or some young person who dreams

• f becoming a rancher, but isn’t blessed to have

grown up on a ranch? Bless them. Your plan can still make sure that your family derives benefit. But broaden the scope of your thinking on may become the successor to your ranch. Most often the successor is a family member or multiple family members, but it need not be. The Japanese business that builds temples named Kongo Gumi was a family business for 1,400 years before becoming a subsidiary of Takamatsu Construction Group. But, they did it by adopting into the family those they believed would be well- equipped to run the business, thereby maintaining its “family” business status. That’s one way to keep it all in the family. Perhaps an extreme way. But it does challenge us to expand our ideas of running an enterprise for succeeding generations. How serious are you about perpetuating your ranch? The overwhelming tendency of most people is to want to divide things up equally among the

• children. For the sake of the overall benefit to the

family, I suggest that you not follow the herd on this, unless all your children are equally interested, invested, skilled and passionate about growing and protecting the ranch across multiple generations. I think the best idea is to prepare them all to participate in some way or another based on their relative talents and strengths, but have just one, or at most two, who are the primary successors going forward. The ranch stands a greater chance of continuing and growing for the benefit of generations of extended family, if it is left mostly to the decision- making stewardship of one person after you. You need a quarterback at the helm.

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As an attorney, I do not have much more practical advice to offer on how to develop your ranch’s successor. You have to impart your vision, not just your ranching skills. This is the single most important thing you can do in the whole process. Step Two: Give Everything to Your Successor. “Give” is another one of those loaded terms. “Transfer through prudent means” would be more accurate, though less catchy for a section title. Leaving out the subsequent steps could bring unpleasant unintended consequences. But, with these first two steps, you have, in a nutshell, the two most fundamental steps: 1) Select and prepare a successor, and when he is ready, 2) Give it to him. I am oversimplifying, of course, for the sake of emphasis. You can transfer control, management, some of the assets, some of the revenue, and so on through

• utright gift, compensation for services, installment

sale, transfers to trusts or other entities, or some combination of these. There are many options available to prudently transfer your ranch assets and

• perations to the next man. The earlier you plan to

do this, the easier it is accomplish, and the more tools in my tool chest we can work with. If you are early in your ranching career, I applaud you for you taking this on now. Many wait until later, when goals become harder to achieve. If you have waited, never fear; there is still much that can be done to achieve the desired ends. Step Three: Get some advisors. If you are working on Step 1, you are already beginning to learn to trust. It is probably more crucial in Step 1, but here, in Step 3, it is almost as

• important. In both steps, the priority in identifying

your key people is whether or not you trust them. Do you trust their knowledge, wisdom and integrity? Are they the kind of person you trust your spouse and children and grandchildren’s well- being with? If not, keep looking. Consider the paper credentials, but also heed your gut. It is not just about educational and professional

• resumes. Those need to be considered, but at a deep

personal level, you need to know that the person across the table shoots straight with you. Such a person is invaluable. Ask someone who has trusted something important to someone untrustworthy A faithful, trustworthy advisor does two main

• things. He speaks truth to you, and he is true to you.

Candor and loyalty are the qualities, in addition to the other measurable, that typify a trustworthy advisor. “Professional,” has its root in the word “profess.” They are, or should be, people who “profess” what they believe to be true in their given field of expertise, regardless of any pecuniary gain they may or may not receive. That’s what makes them professional and not a salesman. I am not a will and trust salesman. While no line of business is conducted without of exchanging value, the professional must be a trusted advisor first and foremost, even to the detriment of his bottom line, if necessary. I profess to a client what I believe to be the best legal ordering of his affairs, based on the available information, my experience, my previous and continuing education. Then, the client pays me because I so professed. If you feel like an advisor is selling you a bag of goods, keep looking. You need advisors, and you need to trust them. Once you have your advisors, trust them. I probably speak for others when I tell you I spend a lot of time and energy knowing the things I know about tax, business and ranch planning and estate planning (among other legal things). It’s almost weird how much time I spend. I have two law degrees, attend continuing education course frequently, and still I spend 2-3 hours each day reading tax law, or related subjects. I have often joked about how being a tax lawyer just shows that I have a mental disorder, albeit a marketable one. I could not acquire the breadth and depth of the ranching knowledge you have by going to a seminar or reading an article or three. I would be ill-advised to go buy a ranch right now and not get some (a lot) of advice about how to run it.

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Step 5 in the process will teach you a little about my “ranch,” but please do not think you are ready to practice tax law after reading a this paper. It will make our conversation go better, and you will be able to more intelligently evaluate the advice you hear from your advisors. You and I need advisors when it comes to handling important things in which we have not yet become experts. The information being provided is to help you assess and evaluate. It cannot supplant the need for others to supply you with expertise they have labored hard to acquire. Step Four: Work the process. The planning process is a process. It is not a gumball machine. At least not if it’s done correctly and conscientiously. One of my law professors said, “Don’t be afraid to get up from your desk and walk around the block and just think about whatever it is you are trying to solve for the client. This is time well-spent.” In the same way, as you have probably experienced in other contexts, sometimes you don’t figure out the solution until you’ve vetted all the non-solutions, or at least most of them. This is why standing around with your friends, staring at an engine drinking beer is so crucial to good mechanic-ing. Who knows how many mistakes you would have made if it was just you drinking one beer by yourself? Similarly, let your advisors poke, prod and diagnose. If a solution offered doesn’t immediately sit right with you, don’t despair, there’ll be others, and then there will be the right

• ne for you. You have to let the process work, and

trust that it will. Alabama football coach Nick Saban is famous for “The Process,” which is his method of training his players to focus on the next step 7 seconds at a time, basically. Don’t get antsy about what is next, and don’t get frustrated with what is past. Just focus on the process, and let the results come as they will. As it happens, for Saban, they are usually wins. If they’re not, they will be next time. His success following The Process is legendary. When you come to your advisors, they have a lot of information already packed into their brains. You are going to put more stuff in there, and then little electrical impulses are going to start zipping around making connections. Some may be quick: “No, I don’t think leaving 10 million dollars and your Ferrari outright to your drug-addict nephew is a good idea.” Most will take more time. Work the process. Be patient with it. Get the win. Step Five: Learn the Territory. I cannot give you a succession plan for your

• ranch. At least not yet. I do not know you or your
• family. I do not know your land. I do not know your

strengths, weaknesses, fears, goals, status of your herds or crops, assets, reliability of your hands, reasons for ranching, subsidies you are receiving, debt you are carrying, debt you are collecting, struggles you are anticipating, inheritance you may receive, lawsuits against you or against an entity that has wronged you, insurance status, personal health or your dreams. There are some common facets to the plans I put together, certainly. You need some kind of a will, and a power of attorney, and maybe an advance healthcare directive. Beyond that, we need to talk. The value of the estate, or the relative complexity you think your situation has is also largely irrelevant. Where you hear an annoying squeak, I may hear a piston sleeve getting ready to pop loose and leave you stranded on the side of the

• highway. In the winter. With no blanket.

Before I show you around my “ranch,” please understand that the previous steps, and what I have just said are absolutely essential. I can tell you about every client I’ve ever had, and I can give you a complete law degree, and still you won’t have a plan for you. You will have a lot of ideas and some tools, but those do you no good until you put in the hard work to come up with a plan that fits you and your family and your ranch. And then you have to tweak it. Just like you would anything. I’m a Georgia Bulldog. I like our

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season so far this year. One of the things I like best about it is that we came back in the SEC Championship and whipped Auburn, after getting

• ur own whipping from them a couple of weeks
• prior. Same players. Same coaches. Tweaks made

the difference. Planning starts general and big and works its way down to the minute details. You will best help whomever you use to help you if you come to them with a candid “big picture” idea of where you want to go, add any details you may think are pertinent, and then respond to diagnostic questions designed to bring out pertinent details. As planners, we constantly “zoom in” and “zoom out” during the process of planning. We can’t get the big picture if we do not have some

• details. But the details are meaningless outside of

the context of the big picture. As we proceed into some technical information, please remember the following, for your own safety and well-being:

• 1. I am not your attorney and you are not

getting legal advice;

• 2. You are a tourist here at my “ranch.”

I want you to enjoy the experience and I want you to learn about what I do, but if you step inside the pen without me (or whoever your attorney is) at your own peril. I don’t do a lot of litigation, but when I do, it is usually due to self-legal-counselling, or just skipping it altogether. Without further ado, I am going to first introduce you to some terms and concepts, then some questions and issues for you to consider, and finally provide you with an intake questionnaire I use in my own practice to give you an idea of information you need to help your advisors as they assist you. Terms and Concepts:

• 1. Annual Gift Exclusion: This is the

amount that someone can give to another person during the calendar year without having to pay gift

• tax. For gifts in 2014-2017 the annual exclusion is

$14,000 per beneficiary.

• 2. Applicable

Exclusion Amount (AEA): This is the amount that someone can leave to their heirs free of estate tax. In 2017, the AEA is $5,490,000. With effective planning, a married couple can leave $10,980,000 to their heirs free of estate tax. It is important for ranchers to remember that this means $10,980,000 of asset, not just cash. And the value will be fair market value, in the case

• f land, not agricultural use value. So, if you the

second spouse to die leaves $12,000,000 FMV of land, and $100 in the bank, some of the land will be sold in order to pay the tax due on $1,020,000.

• 3. Basis: Basis is the tax value of an asset,

usually measured by the date on which the asset was acquired. Capital Gains tax is paid based on the increase in value (gain) from the owner’s basis to the value when the asset is sold. For example, if you pay $10 for something and it increases over time to $100, you have a basis of $10 and a “capital gain”

• f $90. If you sell the asset, you pay capital gains

tax based on that $90.

 Carry-Over Basis: If you give that

property away during your life, the person who receives it has the same basis you had. This is “carry-over”

• basis. So if they sell it for $100, their

basis is still $10 and they pay the tax on the $90 gain. Carry-over basis is generally undesirable, because the person who sells the asset has to pay the capital gains tax liability based on the original owner’s “carried over” basis.

 Step-Up Basis: If you die with an asset

that has increased in value and it goes to someone, that person generally gets a “step up” in basis to the value measured at your date of death. Assume again that the asset you bought for $10 increases to $100 by the time you die. After you die your children receive the asset from your

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estate (valued at $100), and they then sell the asset for $100. Your children have taxable capital gain of $0 because their basis got “stepped up” in your estate when you died. Strategies that target basis adjustment seek to eliminate carryover basis and give step up basis to your beneficiaries.

• 4. Beneficiary: This is the person, entity, or

group for whom a trust is established.

• 5. Bypass / Credit Shelter Trust: This is the

portion of the deceased spouse’s property that gets charged against the decedent’s AEA.

• 6. Charitable

Lead Trust/CLT: With charitable lead trusts the Settlor donates an asset's income stream for a period of years to a charity instead of the remainder interest. The remainder interest can then pass to a private party under the direction of the grantor (i.e. grandchild, child, etc.)

• 7. Charitable Lead Annuity Trust/CLAT:

This is basically the opposite of the CRAT (below). Here the Settlor establishes a trust and names a charity to receive an annuity amount from the trust for a specified amount of time (the “initial term”). At the end of the initial term the remainder pays back to the Settlor or to other non-charitable beneficiaries named in the trust.

• 8. Charitable Lead Uni-Trust/CLUT: This

is basically the opposite of the CRUT (below). Here the Settlor establishes a trust and names a charity to receive a percentage of the trust’s value for a specified amount of time (the “initial term”). At the end of the initial term the remainder pays back to the Settlor or to other non-charitable beneficiaries named in the trust.

• 9. Community Property State: Community

Property refers to property acquired by a couple during marriage, or property that is combined - or commingled - between spouses. It only applies in nine states (the “community property states”): Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska and Tennessee have optional, or elective community property laws, allowing married couples to elect to have jointly-held property treated as community property.

• 10. Community Property Trust (Alaska or

Tennessee): This is a special type of joint revocable trust that takes advantage of special laws in Tennessee and in Alaska that allow people to opt in to the state’s favorable community property laws.

• 11. Conservation Easement: A means of

adding, doing good and protecting your way of life. The full use of these is a complex topic, but this is a potent tool in the planning process.

• 11. Charitable

Remainder Annuity Trust/CRAT: A Settlor establishes this trust and puts property in, keeping the right to receive an annuity payment from the trust for an initial term - either for a term or years or for the Settlor’s life. After the initial term the amount remaining in the trust (the “remainder”) is distributed to a charity named in the trust.

• 12. Charitable Remainder Trust/CRT: This

is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity.

• 13. Charitable

Remainder Uni- Trust/CRUT: A Settlor establishes this trust and puts property in, keeping the right to receive a percentage, or uni-trust amount, of the trust assets for an initial term - either for a term or years or for the Settlor’s life. After the initial term the amount remaining in the trust (the “remainder”) is distributed to a charity named in the trust.

• 14. Domestic

Asset Protection Trust/DAPT: This is a type of irrevocable trust that allows a client to set aside assets in trust and protect those assets from creditor claims.

• 15. Delaware Tax Trap (DTT): Refers to the

process of exploiting the Rule Against Perpetuities (RAP) provision in a trust by allowing a beneficiary to exercise a limited power of appointment in a way that extends the original RAP in the trust. The upshot is that the person who exercises the power

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causes the property subject to the power to be included in their estate (getting a basis adjustment) when they die.

• 16. Incomplete Non-Grantor Trust/ DING /

NING / WING: Delaware / Nevada /

• Wyoming. This is an irrevocable trust that works

primarily as an income tax / capital gains tax strategy. The trust is set up in a state that does not impose state income tax so any highly- appreciated assets sold by the trust will avoid state capital gains tax. Any assets remaining in the trust when the client dies will be included in the client’s gross estate, causing a step-up in basis for those assets.

• 17. Disclaimer: A disclaimer is a legal “no

thank you.” It’s a technique that allows someone who is entitled to receive property to disclaim that property, allowing it to be distributed somewhere else.

• 18. Deceased Spouse Unused Exemption

Amount/DSUEA: This is the amount of AEA that is leftover after the estate plan has allocated part of a deceased spouse’s estate exemption to a bypass trust. 19.Executor/Personal Representative: This is the person who is named in a will to administer the estate of a deceased person. The trustee administers the trust; the executor or personal representative administers the probate estate.

• 20. Family Meeting: What you need to have

in order to get everyone acquainted with, participating in, and implementing the plans and goals you have for your ranch. Think of the family as a core economic engine, driving the world’s economy, and the family meeting is the board. I

• ften help get these going, and then my

involvement usually dials back to an “as needed” basis.

• 20. Foreign

Asset Protection Trust/FAPT: This is a more advanced form of asset protection trust that is established under the laws of a foreign country that has even more favorable asset protection for clients. Nevis, the Cook Islands, Jersey, Guernsey, and other remote countries are popular choices.

• 21. Fiduciary: This describes the nature of a

relationship where one party owes a series of duties to another party and is held legally responsible for the outcomes of their actions.  Trustees are fiduciaries of trusts, owing duties to the beneficiaries.



Executors are fiduciaries of wills,

• wing duties to the beneficiaries.



Guardians and conservators are fiduciaries, owing duties to the ward.



Agents and attorneys-in-fact are fiduciaries, owing duties to the principal under a Power of Attorney.



Health Care Proxies or surrogates are fiduciaries, owing duties to the maker

• f a Living Will / Advance Directive.



Trust protectors may or may not be fiduciaries, depending on the nature of the power that they’re given.

• 22. Funding: This

is the process

• f

transferring property to the trust. The trust must hold title to property in order for it to work, just like a car needs fuel to run.

• 23. Grantor

Deemed Owner Trust/GDOT: This is just an alternative name for the IDGT or IDIT; it’s really the same thing. The grantor (the individual who sets up and puts property into the trust) is deemed to be the owner of the trust for income tax purposes, but the value of the trust property is not included in that person’s gross estate when they later die.

• 24. Grantor / Settlor / Trust Maker: These

terms are generally synonymous, though there are subtle, technical differences. In general, they refer to the individual who establishes a trust. The trustee manages and administers the trust for the benefit of the beneficiary or beneficiaries.

• 25. Grantor

Retained Annuity Trust/GRAT: A GRAT is a sophisticated gifting

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& wealth transfer strategy based on a special type

• f irrevocable trust. The Settlor establishes the trust

and puts property in, and takes back an annuity (calculated as a dollar amount) for a specific amount of time based on the value of the property in the trust. After the annuity period ends the GRAT pays to other beneficiaries.

• 26. GRIT:

Grantor Retained Income Trust: A GRIT is similar to a GRAT except that the Settlor receives the income stream from the trust assets, rather than a fixed annuity amount from the trust for a specified period of time. After the initial term ends the GRIT pays to other beneficiaries.

• 27. Grantor Retained Uni-Trust/GRUT: A

GRUT similar to a GRAT but instead of taking out an annuity interest the Settlor receives a percentage

• f the trust (called a uni-trust amount) for a specific

amount of time based on the value of the property in the trust. After the initial term ends the GRUT pays to other beneficiaries.

• 28. Intentionally

Defective Grantor Trust/IDGT: This is a form of irrevocable trust that gets the value of the trust assets out of the client’s estate but allows the client to continue to be treated as the owner for income tax purposes only. One of the main advantages is that the (often wealthy) client can add value to the trust by paying the income tax that is due on the income in the trust without those tax payments being treated as additional taxable gifts to the trust. Also, it gets the trust out of the more aggressive income tax rate tables that apply to trusts.

• 29. Intentionally

Deficient Irrevocable Trust/IDIT: Also known as the Income Defective Irrevocable Trust - Just one more acronym for an IDGT or GDOT; all these are synonymous. Their usage is simply a matter of the professional's preference.

• 30. Irrevocable Life Insurance Trust/ILIT:

This is an irrevocable trust that is designed to own high-value life insurance. A client establishes an ILIT and pays enough money into the trust to allow the trustee to buy life insurance on the life of the client (and often, the client’s spouse). When the insured person dies, the death benefit of the life insurance is paid into the trust but is not included in the gross estate of the client (thus keeping it away from estate tax liability).

• 31. Intestate / Intestacy: This describes the

condition of someone who dies without having a will or trust in place. If you don’t do your estate planning your property will pass through the laws

• f intestacy in the state where you resided.
• 32. Irrevocable Trust/IRT: A trust that can't

be modified or terminated without the permission

• f the beneficiary. The grantor, having transferred

assets into the trust, effectively removes all of his

• r her rights of ownership to the assets and the trust.
• 33. Marital Deduction: The marital deduction

allows a married individual to leave property to his

• r her surviving spouse free of estate tax. U.S.

citizens can leave an unlimited amount for their surviving spouse.

• 34. Marital Trust: This is the portion of the

deceased spouse’s property that is transferred into a trust that qualifies for the marital deduction. When the surviving spouse later dies the value remaining in the marital trust is included in that spouse’s estate.

• 35. Optimal Basis Increase and Income Tax

Efficiency Trust/OBIT: This is a form of trust that includes elaborate formula language granting testamentary or lifetime powers of appointment to strategically cause assets to be included in a decedent's gross estate. The formula language is designed in a way that prioritizes estate inclusion for assets with low basis in order to ensure assets get a step-up, and not a step-down in basis when the power holder dies, and includes protective language to cause inclusion up to the decedent's AEA.

• 36. Power
• f

Appointment Support Trust/POAST: A client establishes a trust for the client's parent and includes a formula general power

• f appointment to trigger estate inclusion up to (but

not over) the parent generation's AEA & GSTT. When that parent generation dies the assets subject to the power get a basis step up, and the assets

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continue in trust for the benefit of the original client (settlor) and their descendants in a DAPT structure.

• 37. Portability: The concept of portability

allows married couples to effectively combine their individual AEAs, allowing them to pass up to 10,980,000 to their heirs.

• 38. Probate: This is the court proceeding that

must be undertaken to transfer the property of a dead person to surviving beneficiaries. Probate procedures vary widely from state to state but generally they’re public proceedings and can be time consuming and rather expensive. One of the

• bjectives of trust-based planning is to avoid

probate, primarily to save time, minimize the likelihood of disputes among heirs, and preserve privacy.

 Domiciliary probate: This refers to

probate proceedings where the decedent lived at the time of death (i.e., where the decedent was domiciled).

 Ancillary

probate: This refers to possible additional probate proceedings where the decedent owned property, but where he or she did not live. An example would be a Colorado resident who died, but who owned a vacation property in Florida. The domiciliary probate would be in Colorado, and an ancillary probate would be in Florida. (Both could be avoided if the decedent had used a trust!)

• 39. Qualified Domestic Trust/QDOT: This is

a form of marital deduction that can be used for surviving spouses who are not citizens of the U.S.

• 40. Qualified

Personal Residence Trust/QPRT A QPRT works like a GRAT except that the property transferred to the trust is the Settlor’s personal residence. The Settlor keeps the right to live in the home for a specified number of years and after that term ends, the Settlor must move out or begin paying rent to the trust, since

• ther beneficiaries are entitled to the trust property

after the initial term.

• 41. Qualified

Terminable Interest Property/QTIP election: This stands for, and is

• ften associated with a QTIP Trust. This is a form
• f marital deduction that allows a trust maker to set

aside property for the surviving spouse in a trust in a way that qualifies for the unlimited marital deduction.

• 42. Rule Against Perpetuities/RAP: This is

a vague and very confusing legal issue that basically determines how long a trust can legally remain in effect. The original rule is generally “lives in being” (that is, people who are alive or who can be easily identified) at the time the trust becomes irrevocable plus an additional 21 years.

• 43. Revocable Living Trust/RLT: This is the

main document & planning solution many trusts & estates attorneys implement for their clients. The client transfers their property to the RLT during their life so that their trustee (below) can manage that property for the client if the client becomes disabled and when the client dies. It is not an effective asset protection tool.

 Individual / Separate RLT: This is a

trust established for an individual. The client may be a single person, or they may be a married person (typically in a separate property state; see that definition).

 Joint RLT: This is a trust established

for a married couple. If the couple’s marriage is not recognized by law, there can be really bad gift tax consequences for a joint RLT. For married clients in community property states (see that definition), a joint RLT is mandatory to maintain community property status and the favorable tax treatment that follows. Married clients in separate property states may use either a joint RLT or may use separate RLTs.

• 44. Separate

Property State: Unlike community property, separate property receives a basis adjustment only when the owner of that separate property dies. For married couples in separate property or common law states, they may

• wn their property jointly, but it is not treated the

same as community property.

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• 45. Special

/ Supplemental Needs Trust/SNT: This is a special type of trust designed to set aside assets for the benefit of a beneficiary whose disabilities may allow the beneficiary to receive public assistance for medical and other care expenses.

• 46. Standalone Retirement Trust/SRT: This

is a special type of trust designed to receive “qualified retirement accounts” like IRAs, 401(k)s, etc.

• 47. Survivor’s Trust: This term only applies

in the context of a joint RLT plan. The survivor’s trust is the surviving spouse’s share of the joint trust property, plus any separate property the surviving spouse had.

• 48. Testate: This describes the condition of

someone who dies with a will or a trust (often referred to as a “will substitute”).

• 49. Trust: A “trust” is really just a formal

relationship where someone (Grantor) appoints someone else (the trustee) to hold title to and manage trust property for the benefit of one or more people (the beneficiaries). In its basic form a trust is simply a specific type of fiduciary relationship.

• 50. Trust Advisor: Many attorneys use this

term interchangeably with Trust Protector.

• 51. Trustee: This is the day-to-day decision

maker for a trust. The trustee has a series of fiduciary duties to the beneficiaries to make sure that the trust is administered properly according to the trust’s terms and governing law, and that the beneficiaries’ interests are protected. There must always be a trustee for a valid trust to exist, and all trustees are always held to a fiduciary standard.

 Investment Trustee: This is a special

trustee whose job is limited to making investment decisions for the trust.

 Distribution Trustee: This is a special

trustee whose job is limited to making distributions from the trust to beneficiaries.

 Administrative Trustee: This is a

special trustee whose job is limited to keeping documents and records for the trust, often for the purpose of establishing an adequate connection between the trust and the desired state where the law should apply.

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Now that you have had a quick gander around my ranch, here are some questions and issues to help you and your advisors plot your course, and take the steps to get you there:  What are your goals for your ranch?  What are your goals for your family?  What is important to you?  What is the thing you most want to pass

• n to future generations? This can be

tangible or intangible. For example, the most important thing I want to pass

• n is my Christian faith. For others, it

may be work ethic. For others, it may be financial security.  Who in your family is working or living on the ranch now, and who do you think realistically may be in the future, in your lifetime?  Who do you think would make a good successor? Is there an interest on the part of that person, or do you think it can be developed?  Do you have a plan in case there is a need for long term medical care, either in old age, or resulting from an accident?

• Could you pay for it?
• Could the ranch get on without

your daily physical presence running it?  Are you receiving any subsidies (USDA, or otherwise), and if so, do you know the conditions for continuing to receive them, if that is what you want to do?  Do you expect your assets to increase from this point towards the end of your life, or are you more in “stop the bleeding” mode?  Do you need to qualify for Medicare and/or any disability benefits or any

• ther government-related benefits?

 Do you want to prevent a sale of the ranch outside the family as a top priority, or are you open to selling and looking for a new family venture if one arises?  What are the known financial and other needs of your children, grandchildren

• r anyone else you support, or want to

be able to support?  Are there organizations you want to support? Or any you want to make sure you do NOT support?  Do you want to disinherit or limit the benefit of a family member?  Honestly evaluate the likelihood of a battle in the event you become incapacitated or die, especially if you are part of a blended family.  How do you want to provide for your children, extended family or others?  Do you know of any claims or potential claims against you?  Do you have the advisors you need? (Business consultant, financial consultant of some stripe, accountant

• r

bookkeeper, insurance agent, banker, agricultural extension agent, and tax/business/estate planning attorney) If not, think of some steps to “audition” and assemble your team.  Have you considered alternative or supplemental uses of your ranch or your ranch’s assets for additional revenue streams (rent your barn by the pond for weddings, etc)  Have you sought to incorporate the varied strengths of your family members into the ranch operations? For example, you have a vegan, artistic musician snowflake daughter graduating from Berkeley. Do you have a spot on your land where you could place a conservation easement, allow her to build an outdoor amphitheater and host a hippie love- music festival, and maybe a primitive campground? Or maybe you have a Goth son who could use some of the land to establish a local graveyard to go along with his “Undertaker” gamer ID?

P a g e | 10 e z r a l a w o f f i c e . c o m

Just some ideas…I’m not saying these are good ideas!  What about your current trajectory would you most like to change, both for your family and your ranch? Conclusion. Some estimate that over the next 20 years, 70 percent of agricultural use land will transfer, one way or another, out of the present generation. The people who study trends estimate that nearly half of that will transfer outside the families of the land’s current owners. Put another way, nearly one-third

• f all U.S. agricultural land will pass out of its

current families within the next 20 years. I think that is a tragedy, and not just because I cling to a romantic, out-of-touch nostalgia. It is bad both for our nation’s families, and for our nation’s economic well-being, for starters. It also has important implications for many other aspects of society, as well. I hope I have helped seed a vision for your own family’s commitment to bucking that trend. Only part of the solution is legal and other technical

• planning. Those things are an important piece of

the puzzle. But ultimately, you have to find a way to do more than just raise cattle. We need you to raise a new generation. As a colleague of mine wrote in an article recently, “When asked why there is such a poor success rate at keeping farms in the family, an elder rancher put it plainly: ‘Our technical and business skills are fine; it’s our people skills that need help!’ Ranchers and farmers are telling us that their weakest link in succession planning is not technology or information, but human relationship management.” Your best advisor will not neglect the technical

• r the human relationship components of a

successful plan for your ranch’s ongoing success.

Matthew A. Bryan, Sr. practices law in Whitefish, Montana in the areas

• f taxation, estate planning, business law, and real estate. He is

admitted to practice in both Montana and Georgia. A native of Atlanta, Georgia, Matthew holds a B.A. in History from the University of Georgia, a J.D. from Liberty University School of Law, and an LL.M in Taxation from the University of Alabama School of

• Law. He and his wife Pattie have

four children and a Giant Schnauzer, and particularly enjoy exploring their world via

• verland travel.

Matthew may be contacted by telephone at (406) 924-1717, and by email at ezralaw@protonmail.com