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Stan Miller, J.D. David M. Naples, J.D., LL. M. Jeanne Smith, J.D. Orion Samuelson, Guest Speaker Presented by: Wed., April 28, 2010 1:00 – 2:00 p.m. ET.

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Presentation on theme: "Stan Miller, J.D. David M. Naples, J.D., LL. M. Jeanne Smith, J.D. Orion Samuelson, Guest Speaker Presented by: Wed., April 28, 2010 1:00 – 2:00 p.m. ET."— Presentation transcript:

1 Stan Miller, J.D. David M. Naples, J.D., LL. M. Jeanne Smith, J.D. Orion Samuelson, Guest Speaker Presented by: Wed., April 28, 2010 1:00 – 2:00 p.m. ET W E A L T H C O U N S E L T H O U G H T L E A D E R S E R I E S

2 HOUSEKEEPING At the end of the webcast: 1. Download CE Form 2. Download Speaker Bios Submit Questions via Console Chat Feature NOTE: Slides and course materials may be downloaded from www.wealthcounsel.com/Webcast3.aspx

3 HOUSEKEEPING At the conclusion of today’s webcast, please take a moment to complete our short Feedback Poll & Survey.

4 David M. Naples, J.D., LL.M. Shareholder, Leonard, Street & Deinard Mankato, MN Member, American Bar Association, Taxation Section, and Real Property, Trust and Estate Law Section Current Chair, Estate Planning and Administration for Business Owners, Farmers and Ranchers Group

5 Jeanne Smith, J.D. Principal, Jeanne Smith & Assoc.,PC Corvallis, OR Member, WealthCounsel Member, The Advisors Forum Member, Oregon State Bar

6 Stan Miller, J.D. Moderator Founder & Principal, WealthCounsel Founder & Principal, Advisors Forum Principal, Miller & Schrader, PA Little Rock, AR

7 Special Guest Speaker Orion Samuelson Agricultural Journalist, Chicago, IL Broadcast Journalist, WGN Radio 720, Chicago Host, National Farm Report Radio Program Host, Samuelson Sez Radio Program TV Co-Anchor, “This Week in Agribusiness” Inductee, National Radio Hall of Fame

8 Stan Miller J. D. Farm Families Come From 4 Quadrants Passive Ownership of Land Active Farm Operation Lower Net Worth <$3.5 mil. Higher Net Worth >$3.5 mil.

9 Impact of Estate Tax Repeal on Farmers, Ranchers, and Vintners Formula Gifts – issues on death of first spouse of 2010. Types Concerns Property does not pass as intended Liquidity issues Basis issues David Naples J.D., LL.M.

10 Pecuniary Marital Deduction Formulas –Inadvertent disinheritance of surviving spouse –Estate tax from overfunded credit shelter trust –Fail to fully use basis step-up for Qualified Spousal Property

11 Pecuniary Credit Shelter Formulas –Overfund surviving spouse’s estate –May disinherit descendants –QTIP trust taxable if no “state-only” QTIP election

12 Potential Remedies –Define Code as it existed on December 31, 2009 –If no “state-only” QTIP election, consider outright marital gift with disclaimer –If have “state-only” QTIP election, consider all to QTIP trust

13 Annual Exclusion Gifts of Interests in Closely-Held Businesses IRC 2503(b) Must be “present interest” gift “An unrestricted right to immediate use, possession or enjoyment of property or income from property …” Treas. Reg. § 25.2503-3(b)

14 Cases – Addressing Gifts of Business Interests –Hackl v. Commissioner, 118 T.C. 279 (2002), aff’d, 335 F.3d 664 (7th Cir. 2003) –Price v. Commissioner, T.C. Memo. 2010-2 (January 4, 2010) –Fisher v. U.S., 105 AFTR 2d 2010-1347 (DC IN) (March 11, 2010)

15 General Rule – Hackl Test –Donee right to immediate use, possession or enjoyment of property or income therefrom –That provides substantial economic benefit Facts and circumstances Governing documents critical

16 Right to Use Transferred Property –Outright ownership, alone, not present interest –Must essentially be able to convert to liquid asset

17 Right to Receive Income –Hackl test Company generates income near time of gift Portion flows steadily to donee Income flow readily ascertainable

18 Take Aways –Review governing documents –Tie restrictions to strategy –Consider filing gift tax returns to report annual exclusion gifts

19 Love of the Land  “Never sell the farm!!” Equal is not Fair  Equity vs. Control Communication among family members  Don’t assume all the kids want the farm or any part of it Jeanne Smith J.D. Challenges Unique to Farmers

20 Challenges Unique to Vintners ATF regulations on transfer of interests Value of vines increases over time May be more goodwill in valuation Initially capital intense Ancillary revenue sources and businesses

21 Equalizing Gifts Among Heirs Separate the land and operations. 1. Create two classes of ownership The class received by the active children would have managerial duties and would receive both a salary and a distribution from profits. The other class would not have managerial duties and would not receive a salary, but would still receive a distribution from profits 2. Create two LLC’s The Farm Operations LLC will be distributed to the active farming children The other LLC would own the farmland and lease it on a long term lease to the Farm Operations LLC

22 Techniques for Minimizing Disputes In all cases prepare a Buy-Sell Agreement requiring the active children to buy out the passive children and vice-versa. Puts and Calls Long term buyouts to not jeopardize liquidity Valuation with or without minority discounts

23 Techniques for Funding Estates Taxes Irrevocable Life Insurance Trust  May be useful for meeting the estate tax burden of an estate composed of illiquid assets  May provide liquidity for buyouts

24 Techniques for Minimizing Estate Taxes Conservation Easements  Allows land to be preserved, and provides an income tax deduction and estate tax reduction  Lifetime or testamentary

25 Team Approach for Planning Attorneys for parents and children CPA Insurance Professional Investment Advisor Banker (lines of credit) Experts

26 RESOURCES Extension Service University and College Family Business Programs (106) o Land Grant Schools o www.familybusinessonline.org – Austin Family Business Program at Oregon State Universitywww.familybusinessonline.org Checklists Ties to the Land USDA (www.usda.gov)www.usda.gov

27 CONTACT INFO Stan Miller: smiller@aristotle.netsmiller@aristotle.net David Naples: david.naples@leonard.comdavid.naples@leonard.com Jeanne Smith: jsmith@smithlaworegon.comjsmith@smithlaworegon.com Orion Samuelson: bigosam@aol.combigosam@aol.com

28 THANK YOU! 1.Please rate today’s webcast and participate in a short survey. 2.Don’t forget to download materials immediately following this webcast, as live console access will end shortly. 3.The archived version of this webcast will be available on the WealthCounsel website within 24 hours.


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