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:
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
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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
Jeanne Smith, J.D. Principal, Jeanne Smith & Assoc.,PC Corvallis, OR Member, WealthCounsel Member, The Advisors Forum Member, Oregon State Bar
Stan Miller, J.D. Moderator Founder & Principal, WealthCounsel Founder & Principal, Advisors Forum Principal, Miller & Schrader, PA Little Rock, AR
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
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.
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.
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
Pecuniary Credit Shelter Formulas –Overfund surviving spouse’s estate –May disinherit descendants –QTIP trust taxable if no “state-only” QTIP election
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
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)
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)
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
Right to Use Transferred Property –Outright ownership, alone, not present interest –Must essentially be able to convert to liquid asset
Right to Receive Income –Hackl test Company generates income near time of gift Portion flows steadily to donee Income flow readily ascertainable
Take Aways –Review governing documents –Tie restrictions to strategy –Consider filing gift tax returns to report annual exclusion gifts
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
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
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
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
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
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
Team Approach for Planning Attorneys for parents and children CPA Insurance Professional Investment Advisor Banker (lines of credit) Experts
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
CONTACT INFO Stan Miller: email@example.com@aristotle.net David Naples: firstname.lastname@example.org@leonard.com Jeanne Smith: email@example.com@smithlaworegon.com Orion Samuelson: firstname.lastname@example.org@aol.com
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