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g I Brockett’s Ag Advice
> l ijM By John E. Brocket!
Farm Management Agent
~7 Lewistown Extension Office
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One subject I have discussed
innumerable times is to get it in
writing. By that I mean anything
that is an agreement between one
person and another should be in
writing.
Why? Aren’t people trustworthy
anymore? No, that is not the main
problem.
The main problem is twofold.
First, people simply do not
remember details as well as they
think they do. Second, an
agreement in writing is much less
apt to be misinterpreted or
misunderstood. There is
something about seeing it in black
and white that makes it much
clearer.
For instance, I recently worked
with a rental situation where there
was nothing in writing. Neither
party felt there was anything
necessary between the two of
them.
Unfortunately the landlord died
and the land was sold by the heirs.
There was a stand of com on the
land. There was also a new seeding
of alfalfa. In addition, the tenant
had spread over 50 tons of lime last
year.
Guess what? The new owner
wanted to farm the land himself.
Who gets the com? Does the new
owner or the old owner owe
anything to the tenant for the new
seeding or the lime? If there had
lanuary
been a written agreement, there
would be no question.
While we are discussing getting
it in writing, let us discuss that
almost forgotten topic-wills. A lot
of farmers still do not have a will.
WHY? The other day I was amazed
at the reason one farmer gave me.
He said “My father made me
sweat and fight it out with my
brother and sister, so why
shouldn’t I do the same thing? ”
I did not dare tell him that was.
hardly a Christian thing to do,
because he would have been so
insulted that I would never have
been able to work with him again.
My why is why don’t people look at
transactions more in line with “Do
unto others as you would have
others do unto you.”
While we are on the subject of
wills. Please do not try to force
someone whom you profess to love
to do something by way of the will
that they would not do otherwise. I
have had parents leave property to
two or more children with the
kicker” if they will operate as a
partnership.” If the people in
question get along well together
and the operation is big enough for
both of them, it may work.
INVENTORY
Do not forget to inventory. Start
this year even if you never have
before. The experience could be
Keep family on farm by keeping
COLLEGE PARK, MD - If
families are going to stay in far
ming, farms are going to have to
stay in families.
The ways farmers pass their
land and equipment on to the next
generation may vary, but at some
point someone is going to inherit
something. The trick, says Dr.
George A. Stevens, is to make that
very useful for your management
decision making. I have received
several questions since my column
on inventory. One of the questions
concerns putting values on the
various inventory items. There are
several ways to do this. You can
use market, cost, or a flat amount
that does not vary from year to
year.
To arrive at a market value for
some products such as silage,
young cattle, or pigs between 50
and 200 pounds, can be difficult. I
would suggest using a percentage
of the price of grain for silage or
use feed value, a percentage of the
price for adult or marketable
animal for young animals.
TAX MEETINGS
I will have three farm tax
meetings and one farm tax
workshop for my area in central
Pennsylvania. Juniata County-1-
29-86 at Extension office (7:30
P.M.), Mifflin County-2-3-86
basement meeting room Cour
thouse (7:30 P.M.); Centre County
-2-5-86 at Willow Bank Bldg
meeting room (7:30 P.M.).
WORKSHOP: 2-13-86 basement
meeting room Courthouse in
Lewistown (10 A.M. to 4 P.M.).
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SMOKETOWN, PA ' PH: 717-299-2571
SEE US AT THE PA. FARM SHOW BOOTH 431-432
farm in the family
inheritance as painless as possible.
Stevens, an agricultural
economist at the University of
Maryland, says a bit of
preliminary planning is all that is
required. Planning your
disposal makes it easier for your
heirs to keep farming, he says.
Planning how your estate is to be
disposed of involves a lot of op
tions, Stevens says. He adds that
doing this before you die prevents
headaches and saves money for
your heirs.
Stevens offers some tips that can
reduce federal taxes on the estate.
For estates that are expected to
total less than $600,000 at the death
of the surviving spouse:
1. Write a will. If there is no legal
document saying how the estate is
to be divided, there will be more
problems for the heirs. Jointly
owned property automatically
passes to the surviving joint owner
regardless of what the will says.
2. Make sure you have enough
cash available to settle the estate.
It usually takes from three to, five
percent of the total value of the
estate to do this. Cash can come
from insurance policies or other
assets that can be sold quickly.
When the first spouse dies, there
is usually little problem disposing
of the estate. The Internal Revenue
Service’s “unlimited marital
deduction” allows any amount of
assets to pass over to a spouse
without paying any federal estate
taxes. However, when the second
spouse dies, the heirs will pay
taxes on the entire estate, Stevens
says.
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For small estates, Stevens says a
will and ready cash should be all
that is needed. However, anyone
with assets worth over $600,000
should take a few additional steps
he says.
In very large estates, a com
bination of dispersal strategies is
necessary. Methods may include
estate splitting, trusts or gift plans.
Again, Stevens says, the main idea
is early planning.
Farmers with large amounts of
land should start splitting the
estate while both spouses are alive.
The taxes on two estates will be
less than if there was one large
one, he says.
The first thing to do in these
cases, Stevens says, is to split up
any joint ownerships of property
before either spouse dies. Each
then writes a separate will
establishing a special trust for the
other. This trust allows the wife to
benefit from the husband’s
property following his death
without inheriting it, and vice
versa.
By doing this, each partner can
will their part of the estate
separately and reduce the total
amount of taxes paid on the
combined estate, Stevens says.
The calculations leading to this are
long, he says, but the final savings
are significant.
“The main thing we have to be
careful about in these large estates
is not overloading the surviving
spouse with estate taxes,” Stevens
says. He and other Extension
Service specialists spend much of
their time helping farmers plan
their estates so this does not
happen.
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