Estate Planning

We're happy to announce our popular “Planning for the Future of Your Farm” webinar series for 2023.  The four-part online series will be on January 23 and 30 and February 6 and 13 from 6:30 to 8:00 p.m. This workshop will help farm families learn strategies and tools for transferring farm ownership, management, and assets to the next generation.

Workshop topics

Here's what the webinar will cover:

• Developing goals
• Planning for the transition of management
• Planning for the unexpected
• Communication and conflict management during farm transfer
• Legal tools and strategies
• Developing your team
• Getting your affairs in order
• Selecting an attorney

Workshop faculty

You and your family will learn from two of Ohio's top farm transition experts:

• Robert Moore, Attorney with our Agricultural & Resource Law Program. If you didn't already know, Robert was in private practice for 18 years before joining our program. He provided legal counsel to farmers and landowners across Ohio on business, farm transition, and estate planning. 
• David Marrison, OSU Extension Field Specialist in Farm Management. David has been with OSU Extension for 25 years and is nationally known for his teaching in farm succession. He has a unique ability to intertwine humor when speaking about the difficulties of passing the farm on to the next generation. 

Registration

Because of its virtual nature, you can invite your parents, children, and grandchildren to the webinar, regardless of where they live in Ohio or across the United States. The webinar offers an easy way to include all family members in learning about how to develop a plan for the future of your family farm. 

Families must pre-register for the workshop by January 16, 2023 at go.osu.edu/farmsuccession.  We appreciate the support of the Ohio Corn & Wheat Growers Association in sponsoring the workshop and helping us keep the cost at $75 per farm family. The registration includes one printed set of materials that we'll mail to a family member, and other members will have access to electronic copies of the materials.

In-person workshops planned also

Several of our OSU Extension county educators are also hosting day-long in-person versions of the workshop on these dates:

• December 15, 2022 in Auglaize County at The Palazzo in Botkins.  Find more information here.
• January 19, 2023 in Fairfield County at the Fairfield County Agricultural Center in Lancaster.  Find more information here.

Don't miss out

We hope you'll join us for this important series!  Even if you already have an estate plan or have begun one, this workshop should help you learn more and ensure that you're effectively addressing your goals for the future of your farm and farm family. 

For additional information David Marrison at marrison.2@osu.edu or 740-722-6073.

Long-term care costs are a threat to family farms.  In fact, we predict that long-term care costs are the biggest financial threat to farm families, even more so than federal estate taxes.  That’s because long-term care can affect every farm--and when cash or insurance runs out, farm assets may have to be sold to pay for long-term care.  With an increasing elderly population and rising health care costs, the financial pressure of long-term care on family farm succession will probably grow in future years.

What can farm families do to protect farm assets from the risk of long-term care?  Our latest publication by attorney Robert Moore, Long-Term Care and the Farm, addresses this question.  The publication begins with an important first step:  understanding long-term care risk.  What is the chance that a farmer will require long-term care, what kind of care is most common, and what how much will it cost?  Robert presents data and statistics that help us predict the expected type, length, and costs of long-term care services a farmer might require. 

Once we assess long-term care risk, the next important question is how to pay for long-term care while keeping farm assets secure.  Robert explains how Medicare and Medicaid programs can apply to long-term care costs.  He then presents several legal strategies to mitigate long-term care risk and protect farm assets. The guide wraps up with a process a farm family can follow to assess long-term care risk for their individual situation.

It's possible to keep family farmland and the family farm businesses safe from the risk of long-term care.  If long-term care is a concern for your farm family, be sure to read this important new publication and talk with an agricultural attorney about protection strategies. The publication is available at no cost through our funding partnership with the National Agricultural Law Center and the USDA National Agricultural Library.  Read Long-Term Care and the Farm here.

As anyone who has been an executor of an estate or has had to deal with an estate knows, the probate process can be slow, cumbersome and expensive.  Fortunately, much probate, and sometimes all probate, can be avoided with some planning and diligence.  The following is a brief discussion on how to avoid probate with different types of assets.

Real Estate

Survivorship Deeds.  Ohio law allows co-owners of real property to pass their share of the property to the surviving co-owner(s) upon death through a survivorship deed, also referred to as a “joint tenancy with survivorship rights.”  This type of deed is common in a marital situation, where the spouses own equal shares in the property and each becomes the sole owner if the other spouse passes away first.  The property deed must contain language such as “joint with rights of survivorship”.

Transfer on Death Affidavit. Another instrument for designating a transfer of real property upon an owner’s death is the “transfer on death designation affidavit.” This affidavit allows property to pass to one or more designated beneficiaries if the owner dies.  The process is simple, it requires the owner to complete an affidavit and file it with the recorder in the county where the land is located.  Upon the owner’s death, the beneficiary records another affidavit with the death certificate and the land is transferred without probate.

Vehicles

Ohio law also allows motor vehicles, boat, campers, and mobile homes to transfer outside of probate with a transfer on death designation made by completing and filing a Transfer on Death Beneficiary Designation form at the county clerk of courts title office.  There is a special rule for automobiles owned by a deceased spouse that did not include a transfer on death designation. Upon the death of a married person who owned at least one automobile at the time of death, the surviving spouse may transfer an unlimited number of automobiles valued up to $65,000 and one boat and one outboard motor by taking a death certificate to the title office.

Payable on Death Accounts

All personal financial accounts, including life insurance, can include payable on death beneficiaries.  The beneficiaries are added by using forms provided by the financial institution.  Upon the death of the owner, the beneficiary completes a death notification form and submits to the financial institution with a death certificate.  The beneficiaries are then provided the funds held by the account.

Business Entities

The many advantages of using business entities are well known but avoiding probate is an often-overlooked attribute of business entities.  Ohio law allows business entity ownership to be transferred outside of probate by making a transfer on death designation.  This is most commonly done with ownership certificates or within the operating agreement.  Upon the death of the owner, the ownership is transferred to the designated beneficiary with a simple transfer business document.  

Non-Titled Assets

Farms have many untitled assets such as machinery, equipment, livestock, crops, and grain.  These assets can be made non-probate, but it will require either a trust or a business entity.  For example, machinery can be transferred to an LLC.  Then, the LLC ownership is made transfer on death to a beneficiary.

Ohio law allows probate to be avoided relatively easily.  Estates worth many millions of dollars can avoid probate and make the administration easy.  However, the owner of the asset must take the time and make the effort to change the title or add a beneficiary.  An attorney familiar with estate planning can assist with making sure all assets are titled to avoid probate.  The executor and the heirs of the estate will appreciate having little or no probate to deal with.

We discussed long-term care (LTC) costs in our April 20 blog post and analyzed recent data to project that a 65-year-old Ohioan, on average, can expect about $100,000 in LTC costs, and double that for a married couple.  In this post, we continue to examine LTC costs by addressing an important question for farmers:  can the average farmer absorb this cost without jeopardizing the farm and farm assets? 

First, we need to remember that any income received by the farmer could be spent on paying the LTC costs.  Farm income, land rent, social security income, and income from investments can all pay for LTC costs.  After income is used to pay for LTC care costs, non-farm assets, like savings, can be used to pay for the costs. It’s the portion of the LTC costs that income and savings cannot cover that causes farm assets to be at risk.  For example, if the farmer has $40,000 in savings, using that savings to pay LTC leaves only $60,000 of farm assets at risk.

Let’s next turn to the risk to farm assets.  While a farmer would never want to sell any farm asset to pay for LTC, their land is probably the last asset they would want sold.  Most farmers would sell grain, crops, livestock, and machinery before they would sell land.  So, if income and savings cannot pay for LTC care costs, how at risk is the land?  Data can also help us answer this question.  According to the Economic Research Service – USDA (ERS), the total amount of non-real estate, farm assets owned by farmers in the US for 2020 were as follows:

                        Financial Assets                                 $92,013,020,000

                        Inventory (crops, livestock, inputs)      $62,866,872,000

                        Machinery                                          $278,809,055,000

                        Total Non-Real Estate Farm Assets   $533,688,897,000

The ERS further estimates that there were 2.02 million farmers in the US in 2020.  So, on average, farmers owned $264,202 of non-real estate, farm assets.  If income and savings are unable to pay for LTC costs, the average farmer would have an additional $264,202 of assets to sell before needing to sell real estate. 

So, what does all this data tell us?  On average, if farmers are forced to sell farm assets to pay for LTC, they will not need to sell their land.  They may need to sell crops, livestock and/or machinery to help pay for the LTC costs but the land is probably safe.  That is the good news.

The bad news is the above analysis is all based on averages.  When dealing with large numbers, averages are very useful.  We can say with some confidence that on average, a 65-year-old farmer in Ohio will spend around $100,000 on LTC.  However, the numbers cannot tell us with any certainty what a specific farmer will spend on LTC. Farmer Smith in Delaware County, Ohio might never pay any LTC costs, might pay the average of $100,000 or they might be an outlier.  An outlier is someone whose specific circumstances end up being significantly different than the average.

Being an outlier is what farmers are really concerned about regarding LTC.  We all know someone, or have heard of someone, who was in a nursing home for 10 years.  That’s close to $1 million in LTC costs.  Few farmers have the income, savings and non-real estate assets to pay for $1 million of LTC. 

So, what LTC planning for farmers really ends up being is protecting against the outlier scenario that puts the land at risk.  Most 65-year-old farmers would probably sleep well at night if they knew they would only have $100,000 of LTC costs for the rest of their lives.  That amount of LTC costs is probably not going to cause a farm liquidation.  What keeps farmers up at night is the chance they will be the outlier and spend 10 years in an expensive nursing home.

The outlier scenario is important for farmers to understand as they develop their LTC strategy.  For any risk management plan, the true nature of the risk must be understood and not just presumed.  The fact is most farms can probably withstand the average LTC costs.  It is also factual that most farms cannot withstand an outlier scenario of being in a nursing home for many years.  This understanding is critical in developing a LTC plan.  That is, the LTC plan should probably seek to mitigate the risk of being an outlier, not on being average.

Fortunately, there are strategies to help mitigate the risk of losing the farm to the outlier scenario, although each of the strategies have significant drawbacks.  In future posts, we will discuss those strategies.