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Ties to the Land. Succession Planning for Livestock (and other Ag.) Producers Bart Eleveld, OSU Extension Economist. USDA—Risk Management Agency. Private Lands Committee. Outline for the day. 9:30 Registration/Check-In 10 am Case Example Ranch and Financial Analysis
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Ties to the Land Succession Planning for Livestock (and other Ag.) Producers Bart Eleveld, OSU Extension Economist USDA—Risk Management Agency Private Lands Committee
Outline for the day • 9:30 Registration/Check-In • 10 am Case Example Ranch and Financial Analysis • Bart Eleveld, Oregon State University • 10:30 Succession Planning Process, Fair vs. Equal, Conflict Resolution • Steve Hopkins and Doug Sippel, Titan Financial Associates • 11:15 Appraisal, Valuation Discount Issues • Randy Guyer, CPA • 12 noon Lunch • 12:30 Land Trusts • Frank O’Leary, Oregon Rangeland Trust • 1 pm Legal Issues—LLC, FLP, Buy-Sell Agreements • George Guyer, Attorney • 1:30 Charitable Remainder Trusts • Harold Weight, Multiplan Financial Services • 2:15 Panel Discussion, Q&A • 3:00 Closing and Evaluations
Succession planning ≠, > Estate Planning • Need to think about what happens if you live as well as what happens if you die • How to transfer control, decision making and operation of the business if that is an objective • If the business is not to continue, who gets what, and when?
Inventory of the Legacy: Dr. Bart Eleveld Extension Economist, Farm & Ranch Management Agricultural & Resource Economics Department Case Study and Financial Analysis Of Future Alternatives
Ray and Reba Rancher • Ray and Reba are mid 60’s, still active on ranch but moving towards retirement. • Reba had full-time job with no retirement benefits, Max had part-time job in winter. • 3 children, aged 36 – 41. • 800 Cow-calf pairs • 400 ac. Irrigated alfalfa • 100 ac. Winter wheat rotation crop • 300 ac. Native grass hay (baled) • 100 ac. Irrigated pasture • 3500 ac. Deeded rangeland • 4650 AUM Public rangeland pasture
Family Dynamics • Ray and Reba want to ease into retirement but stay on ranch. • Have started drawing SS • Fairly good health for now. • Oldest son, Ray Jr. (41), joined ranch management after college graduation. • Divorced from Rosie (39) and has 3 kids, aged 10 – 14. Oldest already works on ranch and wants in someday. • Second son, Roy (37), has professional career in NYC, is estranged from family. • Daughter Rita Wrangler (36), married to Rudy who has professional, 6 figure income. • Has daughter (12) who is interested in ranching. • Lives in town, but wants to have a house on the ranch.
Current Financial Status • Balance Sheet is pretty healthy but cash flow and income is tenuous. • Current ratio = 1.88 • Farm debt to asset ratio = 37% (33% total) • Farm equity to asset ratio = 63% • Rate of return on farm assets = 1.7% • Term debt coverage ratio = 103%
Resources for Balance SheetIncome Statement & Cash Flow • FINPACK financial analysis software • Center for Farm Financial Management @ U. of MN. • Does balance sheet plus feasibility and cash-flow budgeting for whole farm/ranch management plans • Free trial download available: • http://www.cffm.umn.edu/ • Can “rent” an annual license for ~ $100/yr. • 2 spreadsheet formats • Montana State University’s • OSU/WSU Integrated Financial Statements • Both on Succession Workshop website: • http://arec.oregonstate.edu/succession.html
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