Invocation
Justin Ballew
ANR Agent
UGA Extension – Decatur County
Networking
Breakfast
Welcome
Dr. Kent Wolfe
Director, Center for Agribusiness and Economic
Development, University of Georgia College of
Agricultural and Environmental Sciences
Local
Comments
Mr. Rome Ethredge
County Coordinator/ANR Agent
UGA Extension – Seminole County
Summary of the
2014 Georgia Agricultural &
Agribusiness Outlook
Dr. Nathan Smith &
Dr. Curt Lacy
Extension Economists,
Department of Agricultural & Applied Economics
The University of Georgia College of Agricultural and
Environmental Sciences
Animal Products and Timber Outlook
Dr. Curt Lacy
Extension Economist-Livestock
Key Factors Impacting Livestock
Markets and Profitability
• Economy (consumer
demand)
• Crop prices
– Feeder cattle demand
– Sector profitability
• Big picture items
PER CAPITA DISPOSABLE
PERSONAL INCOME
Dollars
Quarterly
40000
38000
36000
Current
Dollar
34000
32000
2005
Dollar
30000
28000
26000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Livestock Marketing Information Center
Data Source: Bureau of Economic Analysis
05/30/13
QTRLY GROSS DOMESTIC PRODUCT (GDP)
Real Dollar (2009) Change from Previous Quarter
Percent Change
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
1998
2000
2002
2004
2006
2008
2010
2012
Livestock Marketing Information Center
Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC
12/06/13
Beef Cattle Situation & Outlook
Relationship between Corn and Cattle Prices
$190.00
$9.00
$170.00
$8.00
$150.00
$7.00
$130.00
$6.00
$110.00
$5.00
$90.00
$4.00
$70.00
$50.00
$3.00
500-600
Nearby corn futures
$ Per Cwt.
180
MED. & LRG. #1 & 2 STEER CALF PRICES
500-600 Pounds, Georgia, Weekly
170
160
150
140
130
120
110
100
90
JAN
APR
JUL
Avg. 2007-11
Data Source: USDA-AMS, Compiled by LMIC
Livestock Marketing Information Center
2012
OCT
2013
BEEF COWS THAT CALVED
JANUARY 1, 2013
(1000 Head)
221
1506
922
11
375
527
510
694
1805
610
231
315
113
155
925
290
360
715
1328
1757
191
200 686
1028
364
912
175
1754
390
851
174
486
4015
VT 12
NH 4
MA 7
RI 2
CT 6
NJ 9
DE 4
MD 41
90
260
1688
651
490
0 to 155
155 to 390
390 to 912
912 to 4016
454
5
908
70
U.S. Total:
29295
Livestock Marketing Information Center
Data Source: USDA-NASS
02/04/13
CHANGE IN BEEF COWS NUMBERS
JANUARY 1, 2012 TO JANUARY 2013
(1000 Head)
4
50
60
1
10
-20
41
-10
-5
78
4
-20
30
-79
-5
-10
-15
-5
-10
29
-44
-119
-4
-100
5
4
-38
-5
-24
-45
-58
-10
0
-550
22
33
VT 2
NH -1
MA -1
RI 0
CT 2
NJ 1
DE 1
MD -2
1
-22
-550 to -15
-15 to -1
-1 to 4
4 to 79
2
-1
-32
-8
U.S. Total:
Livestock Marketing Information Center
Data Source: USDA-NASS
-862
02/04/13
CHANGE IN BEEF COWS NUMBERS
JANUARY 1, 2003 TO JANUARY 2013
(1000 Head)
-49
74
-15
0
-20
-76
22
-12
28
-110
-36
-1
-49
-43
-14
8
15
-23
28
-72
133
-222
-328
-36
14
-38
-171
-10
-166
-65
-131
-44
-55
-1368
-9
-100
VT 3
NH 0
MA 1
RI 0
CT 0
NJ -1
DE 0
MD -1
-81
-126
-1400 to -55
-55 to -14
-14 to 0
0 to 134
-35
0
-42
-12
U.S. Total:
-3236
Livestock Marketing Information Center
Data Source: USDA-NASS
02/04/13
JANUARY 1 “BEEF COW FACTORY’
U.S., Annual
Mil. Head
50
Beef cows down 3 % @ 29.3 mil
Beef replacement heifers up 1.8 % @ 5.20 mil
Total beef cow factory down 2.5 %
Expect January 1, 2014 to show decline 1-3% in
cow herd.
45
Replacement
Heifers
40
Beef Cows
35
30
25
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Meat supplies were virtually
unchanged for two years in a row
Commodity
Beef
Pork
Total Red Meat*
Broilers
Total Poultry**
Total Red Meat & Poultry
2013
2014
2012 Projected Forecast 13 vs 12
14 vs 13
BILLION POUNDS
PERCENT CHANGE
26.00
25.72
24.32
-1.09%
-5.76%
23.27
23.20
23.58
-0.30%
1.61%
49.55
49.18
48.16
-0.75%
-2.12%
36.64
37.75
38.90
2.94%
2.96%
43.05
44.08
45.33
2.34%
2.76%
92.60
93.26
93.49
0.71%
0.25%
Source: USDA-WASDE, January 2014 Report
Past and Projected Prices
$180
$160
$140
$120
$100
$80
$60
$40
2010
SE 500# steer
2011
2012
SE 750# steer
2013
Choice fed steer
2014
2015
SE Slaughter cow
Source: USDA, LMIC and UGA
Projected Beef Cattle Profits in 2014
• Cow-calf
• Stockers
• Finishing
Graphics source: CattleFax: Long-term Outlook.
www.cattlefax.com
Beef Cattle Summary
•
•
•
•
For 2013 expect lower production
Higher prices
Higher profits
More heifer retention
DAIRY SITUATION AND
OUTLOOK
What will drive prices in 2014?
• Declining cow numbers
• Strong demand for
dairy exports
• Favorable feed prices
• Production abroad
rebounds
Georgia Milk Production Since 2000
During this time, milk
production per cow
increased from 16,500 to
19,200.
Georgia Milk Mailbox Prices 2001-2014 (est.)
2014: $21.50 - $23.50
Other Considerations
•
•
•
•
2014 Farm Bill
Margin insurance
Tied to production controls??
Still being debated in Congress
IOWA MARKET HOG PROFIT
Farrow/Finish, Monthly
$/Head
60
40
Latest Data: November 2013
20
0
-20
-40
-60
2004
2005
2006
2007
2008
Livestock Marketing Information Center
Data Source: Iowa State University
2009
2010
2011
2012
2013
Big Story in Pork Production
•
•
•
•
•
PEDV = Porcine Epidemic Diarrhea Virus.
Highly contagious type of Coronavirus
Confirmed in 22 states.
Deadly to small pigs and piglets.
Could reduce domestic pork production by 2-3
percent in 2013-2014.
Pork Summary
National Base Hog Price
($/Cwt. Carcass weight)
$95
$90
$/Cwt. Carcass
• Expect slightly more
production
• Stable prices
• Improved profits
$85
$80
$75
$70
$65
$60
2010 2011 2012 2013 2014
Lower Feed Cost and 2013’s Reduced
Broiler Production Leads to Expansion
BROILER EGGS SET
Weekly
Mil. Eggs
215
210
Avg.
200812
205
200
195
2013
190
185
180
2014
T
O
C
L
JU
R
AP
JA
N
175
Livestock Marketing Information Center
Data Source: USDA-NASS
RTC BROILER PRODUCTION EXPANDS
THROUGH 2015
Quarterly
Bil. Pounds
10.5
Avg.
2008/12
10.0
2013
9.5
2014
9.0
2015
8.5
JAN-MAR
APR-JUN
JUL-SEP
OCT-DEC
Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC
Pounds
U S POULTRY CONSUMPTION SHOULD INCREASE BASED ON
INCREASED PRODUCTION AND REDUCED RED MEAT SUPPLIES
Per Capita, Retail Weight, Annual
100
Turkey
80
60
40
Total Chicken
20
0
1990
1993
1996
1999
Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC
2002
2005
2008
2011
2014
Cents/Lb.
115
BROILER PRICES LOWER IN 2014 BUT HIGHLY
PROFITABLE INTO 2015 (DEPENDING ON FEED COSTS)
National Composite, Weekly
110
Avg. 200812
105
100
95
2013
90
85
80
2014
75
70
Livestock Marketing Information Center
Data Source: USDA-AMS
Big Picture Items
• Antibiotics
• GMOs
• Humane treatment of animals
Honey Reports 2013
Piedmont and North Georgia experienced
20-25% below normal honey yields due to:
- record amounts of rainfall
- below average temperatures
Southern Georgia experienced the complete opposite
with average to above average honey yields.
Due to a decrease in overall honey production, honey
prices rose 11% from 2011-2012 and 10% from 20122013 with the trend expected to continue in 2014.
Timber and Forest Products Outlook
• Improving economy
should help
• 91 bio-energy facilities
planned for SEUS
– 2 pellet mills in GA
• Improving exports
– Hardwood to Europe
– All wood and products to
China
Livestock, Poultry, and Timber Summary
• Improving economy should support demand
for all livestock and poultry products.
• Lower grain prices and tight supplies will
bolster demand for feeder cattle.
• Lower grain prices and increasing exports
should support livestock and poultry prices.
• Higher prices and lower costs = higher profits
in 2014.
Georgia Row Crops
Situation and Outlook for 2014
Nathan Smith, Don Shurley, and Amanda Smith
Department of Agricultural and Applied Economics
University of Georgia
Row Crop Situation Heading into 2014
• Challenging production season with wetter
than normal conditions and cooler
temperatures into middle of the summer and
then dry late season.
• Supply outpacing demand in most crops.
• Downtrending prices, especially since harvest.
2013 – Mixed Year For Yields
Corn
Cotton
Peanut
Sorghum, Grain
Soybean*
Tobacco
Wheat*
2012
2013
5 Yr. Avg.
Record
180 bu. 175 bu.
153 bu.
180 bu. (2012)
1,091 lb. 850 lb.
830 lb. 1,091 lb. (2012)
4,580 lb. 4,430 lb.
3,739 lb. 4,580 lb. (2012)
55 bu.
50 bu.
45 bu.
53 bu. (2009)
37.5 bu.
40 bu.
30.5 bu.
37.5 bu. (2012)
2,250 lb. 1,750 lb.
2,196 lb. 2,470 lb. (‘91,’96)
49 bu.
60 bu.
48 bu.
56 bu. (2008)
* New Record set in 2013
2013 Ag Forecast
Corn Market Factors
• Record 2013 production.
• Leveling off of corn-starch ethanol
industry.
• Growing domestic use.
• Increase in world production and use
(South America shifting back to
soybeans).
U.S. Corn Supply and Demand
16,000
50%
14,000
13925
1315040%
Mil. Bu.
12,000
10,000
8,000
6,000
19.8%
30%
Record high crop in 2013/14
Reversal of trend to, now increased stocks
17.5%
11.6%12.8%
4,000
20%
13.9%13.1%
12.4%
8.6% 7.9% 7.4%
10%
2,000
0
0%
2004/05
2006/07
Ending Stocks
2008/09
Production
2010/11
2012/13
Domestic Use and Exports
Stocks:Use
Change in Pattern for Corn Use?
Feed and Residual
Ethanol
Exports
Food Seed and Other Industrial
13/14
12/13
11/12
10/11
09/10
08/09
06/07
05/06
04/05
03/04
02/03
01/02
00/01
99/00
98/99
97/98
96/97
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
07/08
Ethanol use flattening out
Feed use to rebound
Million bushels
Corn Price Outlook
• South America shifting back to soybeans.
• Exports, livestock feeding and size of U.S. and
foreign corn crops will influence corn prices in the
future.
• Reduced U.S. acres 2 million or more.
• Prices likely to range between $4.75 and $4.
• Another 14 Mil. Bushel crop would push prices
below $4.
Soybean Market Factors
• Tight US supply situation.
• Global demand for soybeans and products
growing.
• Bullish exports sales and shipments.
• Increase in South American production.
U.S. Soybean Supply and Demand
4,000
50%
3,500
45%
3,304
40%
3,289
35%
Mil. Bu.
3,000
2,500
2,000
1,500
1,000
8.6%
30%
2013 Reversal of down trend in production and use.
25%
Tighter supply situation due to increased exports.
18.7%
20%
15.6%
15%
6.7%
500
0
256
449
574
Ending Stocks
206
4.5% 4.5%
6.6% 5.4%
4.6% 4.5%
138
215
Production
151
169
Total Use
141
150
10%
5%
0%
Stocks:Use
World Soybean Supply and Use
Million Metric Tons
Beg
Stocks
Production
Imports
Domestic
Crush
Exports
End
Stocks
World
60.11
283.54
104.40
239.57
107.83
70.23
U.S
3.84
88.66
0.41
45.86
39.46
4.63
Total Foreign
56.28
194.88
103.99
193.71
68.36
65.60
Argentina
24.35
53.50
0
38.50
9.7
27.98
Brazil
15.76
89.00
0.10
37.00
44.00
19.76
13.05
14.83
93.62
89.79
0.34
14.46
12.19
12.20
69
68.35
0.23
13.66
Major Importers
China
Source: Janauary 10, 2014 WASDE
Soybean Price Outlook
• Relatively tight US supply again, but World
supply not as tight.
• Crush about the same as last year.
• Exports key for prices heading into 2014,
China growth and positive crush returns
indicate more soybean imports.
• More acres in US and GA
• Prices likely between $10 and $11 per bushel.
Peanut Market Factors
• Better crop than expected in 2013 leads to
large carryover.
• Exports down
• Domestic Use up
• Overall Use down
Peanut Disappearance by Use
4000
3500
3381.5
3000
1,000 Tons
2500
2000
2087
1500
1000
1147
500
502
0
Food Use
Exports
Crush
Seed, Shrink, Resid
Production
Carryover
Peanut Projections
2014/14
3,775 lb Yld 3,775 lb Yld 3600 lb Yld 4,000 lb Yld
USDA
2011/12
Beginning Stocks
Production
Total Supply
Total Use
Ending Stocks
758
1,830
2,715
2,213
502
2012/13
502
3,382
3,943
2,557
1,386
+10% Acres, +15% Acres, +15% Acres, +15% Acres,
2013/14
1.144 M 1.196 M 1.196 M 1.196 M
1,386
2,087
3,506
2,359
1,147
1,000 Tons
1,147
2,160
3,339
2,447
892
1,147
2,258
3,437
2,447
990
1,147
2,153
3,333
2,447
885
1,147
2,393
3,572
2,447
1,124
Peanut Price Outlook
• Early contracts offered for $425 per ton.
• Some with $50 premium for High Oleic’s like
Georgia 09B.
• Peanut prices to be determined in part by
cotton prices before planting.
• Acreage expected to increase 10-15%
• Prices likely to range between $425 and $475
per ton.
Cotton Market Factors For 2014
• Record level of World Stocks
• Slowly improving World demand
• Acreage and production in 2014
• Chinese stocks policy and impact on demand
for imports (US exports)
79.67
Ending Stocks, China and Rest of the World (ROW)
70
China has built massive stocks
But, ROW has actually declined
60
Million Bales
50
40
30
20
10
0
2007
2008
2009
2010
Crop Year
China
ROW
2011
2012
2013
China An Increasing Unknown
and Source of Instability
• Two years of building stocks (why, impacts)
• Imports cut by ½ this year
• News that imports will decline further for 2014
• What will happen to large stocks/reserves?
• China began to auction off stocks, mills did not want
• News that some mills are closing, relocating elsewhere
2014 Price Outlook
• US and World production likely to increase
• Demand should continue to improve
• Chinese imports (US exports) may decline significantly
• Prices (Dec14 futures) likely to range between 75 and
85 cents.
• High end of this range and rallies may depend on
supply shocks
2014 Outlook
• Most prices lower due to increase in production.
• Demand increases on soybean side.
• Corn use other than ethanol to pick up.
• Soybeans may have most optimistic outlook
• Fewer acres of corn and wheat in Ga and more
•
acres of peanuts, soybeans. Cotton, stable to up.
Profit margins tighter.
Georgia Major Row Crops Acres Planted*
1,000 Acres
2008
370
Corn
940
Cotton
690
Peanuts
60
Grain Sorghum
430
Soybeans
* Tobacco is acres harvested.
16
Tobacco
480
Wheat
2013 Ag Forecast
2009 2010 2011 2012 2013 2014P Change
420 300 345 345 510 385 -25%
1000 1400 1600 1290 1370 1400 +2%
510 565 475 735 430 500 +16%
55
55
0%
55
45
50
55
470 270 155 210 230 250 +9%
2013
except wheat.
11.5
13 +13%
14are authors
11.4 projections
11.9 10.5
340 170 250 290 410 270 -34%
2014 Net Returns Comparison
Non-Irrigated
Corn
Cotton
85
750
3,400
65
30
Expected Average Price
$4.60
$0.78
$440
$4.14
$10.80
Crop Income Per Acre
$391
$585
$748
$269
$324
Variable Costs Per Acre
$289
$436
$543
$226
$238
Return Above Variable Cost
$102
$149
$205
$43
$86
Expected Yield
2013 Ag Forecast
Peanuts Sorghum Soybeans
2014 Net Returns Comparison
Irrigated
Corn
Cotton
200
1200
4,700
100
60
Expected Average Price
$4.60
$0.78
$440
$4.14
$10.80
Crop Income Per Acre
$920
$936
$1034
$414
$648
Variable Costs Per Acre
$653
$542
$651
$344
$321
Return Above Variable Cost
$267
$394
$383
$70
$327
Expected Yield
2013 Ag Forecast
Peanuts Sorghum Soybeans
Keynote
Mr. Will Thompson
Associate
James, Bates, Brannan, Groover LLP
Successful Succession
“By failing to plan, you are planning to fail.”
-Winston Churchill
Willard D. Thompson, J.D., LL.M.
What We Will Cover
• Tax Law Update
• Critical Questions
• Techniques
Tax Law Update
“The hardest thing in the world to understand is
the income tax.”
-Albert Einstein
2014 Tax Rates
• Ordinary Income – highest marginal rate
39.6%
• Capital Gains and Dividends – 20%
• Estate Taxes – 40%
• Medicare Investment Surtax – 3.8%
• Additional Medicare Payroll Tax – 0.9%
Federal Transfer Tax Changes
“Permanent” Lifetime Exemption
• $5.34 million in 2014 per individual
• Indexed for inflation in future years
• Excess over exemption is taxed at 40%
• Estate and Gift Tax are unified – they share the
same exemption
• Portability
Annual Exclusion
• $14,000 per year to any beneficiary tax free
• Expected to increase at a slower rate than the
lifetime exemption
Farmers, Landowners and Taxes
• Unfortunately, no matter the laws in place,
farmers and landowners often bear more than
their fair share of the Transfer Tax burden
• According to the US Department of Agriculture,
a farmer is more than twice as likely to owe
Federal Estate Tax at death as an average
person
• After they have paid a lifetime of Income Tax,
their assets may be subject to Estate Taxes at
their death
Business Succession
“Plans are nothing; planning is everything.”
-Dwight D. Eisenhower
Succession is a Process
• Succession is a whole-family process that
affects everyone in the family deeply and
differently
• It will change the family system forever
• More often than not, the new business
leader also becomes the next leader of the
family
Succession is a Process Continued
•
•
•
•
•
It is not a one-size-fits-all process
Owners of family farms and agribusinesses, in particular,
struggle with unique characteristics that extend beyond
the business to personal relationships
It is the ties among parents, children, siblings, spouses
and in-laws that make a succession plan a necessary part
of not only managing personal wealth but more
importantly the business itself
It is important to talk with your family about establishing
a business succession plan to begin the process of
developing a transition for your family business
With open communication, between generations, it is
more likely that your business goals with be met while
maintaining harmony in the family
Nine Reasons Family Businesses Fail to
do Succession Planning
•
•
•
•
•
•
•
•
•
It is not urgent
The focus on tax avoidance and “drop dead plans” creates a false
sense of security
Family member and/or employee push back
It is always safer not to change
Family businesses do not know how to undertake succession
planning
Lack of courage among the next generation family business
leaders
Senior generation family business leaders do not know how to
be fair to their non-employee children relative to their employee
children with respect to inheritance
Family businesses see succession planning as an event – not a
process
It costs too much
What to do with the Family Business?
Basically, you have three options:
• Pass it on to the family members
• Plan to sell it while you are alive
• Let your estate sell it
Critical Questions
“When planning for a year, plant corn. When
planning for a decade, plant trees. When
planning for a life, train and educate people.”
-A Chinese Proverb
Critical Questions
• How do we select the next leader of the
company?
• When do we decide who will be the next
leader of the company?
• When and how should leadership transition
take place?
• How do we evaluate our new leader’s job
performance?
• How do we provide meaningful careers for
other family members who are not chosen to
lead?
WHO IS GOING TO BE YOU?
Find Your Successor and
TRAIN HIM/HER NOW!
•
•
•
70-80% of family businesses pass to the owners’
children
Not surprisingly, 70-80% of these businesses then
FAIL, because the next generation has no idea how to
manage the assets
So…
•
•
•
•
•
If the farm or agribusiness will stay in the family, who will run it?
Is that person currently working in the business?
Are they being trained to run the business?
Are they currently being brought in on the decision making
process?
Is there someone who can assist a family member in running
the business after you are gone?
What are the Problems we see with
These Potential Heirs?
• Not financially responsible
• Do not understand the family business
• No clue as to the amount of work it took to
accumulate your wealth or the value of
money
• Constantly spending beyond their needs
• Potentially ruin the initiative of younger
generations
How to Avoid These Problems?
You need to start planning!
“A good plan today is better than a perfect plan
tomorrow.”
- George S. Patton
Techniques
Planning Techniques
• Doing nothing (approximately 80% of
Americans)
• Joint Ownership with spouse
• Giving away assets during lifetime
• Beneficiary Transfers
• Wills
• Irrevocable Trusts
• LLCs (Limited Liability Companies)
• FLPs (Family Limited Partnerships)
• Buy-Sell Agreements
Doing Nothing
• Means dying “intestate” (legal jargon for
“without a Will”)
• Each state has laws that dictate how an
intestate person’s property will be distributed
• You have absolutely NO CONTROL
• Property may go to people you don’t want and
in ways of which you do not approve
• This technique is roughly described as “letting
the chips fall where they may”
Joint Ownership with Spouse
• Planning may be necessary after the death
of the first spouse when still in a period of
mourning
• No time for planning if both spouses die
simultaneously
• Assets are subjected to creditors and
predators of both spouses
• There is NO remarriage protection:
•
Your assets may end up with people you never knew
The Next Husband
Giving Away Assets
• You lose control
• May cause huge problems if Medicaid
assistance is needed within 5 years after the
gift is made
• You may lose significant tax benefits
(although, if properly done, you may gain
some significant tax benefits)
What is a Will?
•
A formal document that allows you to direct the transfer
of property you own at your death
A Properly Drafted Will Allows You To:
• Set aside to provide for your surviving spouse
for her lifetime
• Choose who receives those assets after the
surviving spouse’s death
• Select which children ultimately receive which
assets and in what amounts (i.e., farm vs.
insurance)
• Avoids or minimizes family confusion and
disagreements
• Minimizes or eliminates estate taxes
What is a Trust?
• A Trust is a legal relationship – a special kind
of contact designed to control property
management and distribution
• A Trust has three separate roles:
•
•
•
Grantor (also referred to as Trustor, Settlor, or
Creator) who created and funds the Trust
Trustee who holds the property and administers the
Trust
Beneficiary who receives benefit from the Trust
What is a Trust?
• A Trust is a contract between two parties for
the benefit of a third party
Grantor
Trustee
Beneficiary
Wills and Trusts Enable Sophisticated
Estate Planning
•
•
•
•
Creditor/Predator Protection
Remarriage Protection
Estate Tax Minimization
Additional care for children (or spouses)
with special needs that are disqualified for
government benefits
Limited Liability Companies
• LLCs are highly flexible and customizable tools
that hold many benefits for small business
owners (including farmers and ranchers)
• LLCs can be thought of as a hybrid between a
partnership and a corporation
• LLC Operating Agreements can restrict
ownership in the company only to lineal
descendants or trusts where the ultimate
beneficiaries are lineal descendants
Family Limited Partnerships
• FLPs are also highly flexible and
customizable tools that hold benefits for
small business owners like farmers and
ranchers (similar to LLCs)
Present Benefits of LLCs and FLPs
• Allows control to be maintained by the
organizers, as opposed to gifting undivided
interests
• Limits personal liability
Lower Estate Taxes
• Non-controlling and marketability
adjustments can reduce the fair market
value of ownership interests
• Gifting of ownership interests
•
•
The annual exclusion is currently $14,000 for an
individual (or $28,000 for a married couple)
Annual gifting of LLC interests in these amounts can
greatly reduce the size of your estate
Equalizing Gifts Among Heirs
• One way to equalize the inheritance received
by children who are active in the operation of
the farm or ranch with those who are not is to
create two classes of ownership
• Another way to equalize inheritance is to
prepare a Buy-Sell Agreement requiring active
children to “buy out” the passive children
• FLPs and LLCs can also utilize Buy-Sell
Agreements and other provisions that restrict
the transfer of interests in these entities (e.g.,
only your descendants)
Other Vehicles for Succession and
Estate Planning
•
•
•
•
Grantor Retained Annuity Trusts (GRATs)
Self-Cancelling Installment Note (SCINs)
Annual Gifting using Annual Exclusion
Use of lifetime exemption to move
appreciated property to the next generation
• Dynasty Trust or Generation-Skipping Trust
• Irrevocable Life Insurance Trust
Conclusion
• There is no better time than the present
WARNING!
The United States Department of Agriculture
has several restrictions and limitations when
using LLCs and FLPs to hold farm property, so
be sure to check with your agriculture attorney
to see how using an LLC or FLP will affect your
farm plan before using either for estate
planning purposes
Questions
Dr. Kent Wolfe
Director
Center for Agribusiness & Economic Development
The University of Georgia College of Agricultural
and Environmental Sciences
Comments from
Event Sponsors
Mr. Jeff Nunnery
9th District Field Representative
Georgia Farm Bureau
Comments from
Event Sponsors
Mr. Jack Spruill
Marketing Director
Georgia Department of Agriculture
Closing Remarks
Dr. Kent Wolfe
Director
Center for Agribusiness & Economic Development
The University of Georgia College of Agricultural
and Environmental Sciences
Thank you for
Attending!