LIFE INSURANCE FOR YOUR FARM OR BUSINESS Robert J. Thee, Pb.D. Extension Agent Housing And Family Resource Management A new year has arrived, and for many people, a lot of changes have come with it Our need for life insurance also changes over time. What was adequate protection five or ten years ago may be too little or too much today. Now is a good time to review you life insurance coverage. The primary reasons for buying life insurance are for protection from loss of income and some times as a method of forced sav ings. But in addition to the usual reasons for buying life insurance, it also can assist in the transfer of your farm or business to your children or heirs. For example, if you are operat ing a farm or business as a partner ship, what happens to the business if your partner dies? Will the part ners family or heirs want to stay in the business, or will they want out? If they decide to stay, do they pos sess the expertise necessary to run (he business? The ideal solution is to arrange for the orderly transfer • Agricultural • Commercial • Residential • Retaining Walls • Bunker Silos • Manure Storage, Etc. » i,'. / *V v> or sale of the business prior to death. One method erf transfer is a buy sell agreement. A buy-sell agree ment consists of two parts. The first part of the agreement specifies the terms under which each owner agrees that his or her share of the business will be sold to the remain ing owners at death. The second part is an agreement by each owner to buy the share of the deceased owner. The agreement should also specify how the value of the prop erty will be determined so as to avoid disagreements later. This is also known as a cross-purchase plan. How will the surviving part ners) be able to marshal the resources necessary to buy out the business? This is where life insur ance can come to the rescue. If each partner carries a sufficient amount of insurance on the life of the other partner(s) to fund the buy out the deceased partners interest, a smooth transfer of the business can be accomplished. Typically a cross-purchase agreement might work like this. Tom and Hairy are equal partners in a business valued at $500,000. Tom purchases a $250,000 life insurance policy on Harry’s life. Harry does the same on Tom’s life. Assuming Tom dies first, his share of the business passes to his estate. The insurance proceeds on Tom’s life are paid directly to Har- Partial In-Ground Tank Featuring Commercial Chain Link Fence (5’ High - SCS Approved) 430 Concrete Ave., Leola, PA 7-656-2016 INC. iy. Then in accordance with the cross-purchase agreement, Harry pays cash to Tom’s estate. In return for the cash payment, Tom’s executor transfers Tom’s share of the business to Harry. Harry is now the sole owner of the business. If there had been three equal partners initially, each partner would cany life insurance on each of the other two partners in the amount of one-half of the value of the deceased partners interest, or equal to one-sixth the total value of the business. Life insurance also can provide a solution to a situation where a parent wants to pass on the busi- ness to his children. Suppose there are three children, only one of whom is interested in continuing New Holland Vegetable Day Set NEW HOLLAND (Lancaster Co.) Fresh market vegetable producers will want to attend the 1996 New Holland Vegetable Conference sponsored by the ELANCO Adult Fanner Program and Lancaster County Coopera tive Extension on Feb. 19. Ibis year’s program features 19 different topics dealing with the production and marketing of fresh produce. Steve Groff, a grower from Holtwood, will discuss his experi ences growing vegetables in a hairy vetch cover crop for weed control and nitrogen management Scott Walker, from Jersey Acres Farms, will be on hand to discuss annual strawberry production on plastic, as well as asparagus pro duction. Farmers interested in using compost will be interested in the results of compost trials at Penn State and die Rodale Institute. The marketing end of vegetable pro 4 HHCMIar Farming, Saturday, February 10, Itttcs the business. The parent wants each child to share equally In the estate, but does not want to have to sell the farm. If the child who wants to continue the hn«inen purchases sufficient insurance on the life of the parent, die proceeds can be used to buy out the interest of the other children. Because the policy on the life of the parent is owned by the child, it will not be included in the parents’ estate and is not taxable to the child. Hie pre miums, however, are not tax deductible to the child. Alternatively, the parent could purchase a life insurance policy on his or her own life, again in an amount that would equalize the estate to be divided among the three children. In this case, howev- duction will be covered with ses sions cm topics such as ethnic mar ket needs, post harvest quality, and contract fresh market vege table production. Greenhouse growers will find topics on green house pest management and greenhouse design. Variety trials are always popu lar and this year’s program will discuss sweet com and pumpkin varieties as well as bedding plant varieties. As always, university re searchers will be on hand to dis cuss the latest in disease, weed, and insect control in vegetable crops. Builders, Ag Suppliers Conference Set MEADVEJLE (Crawford Co.) A Builders’ and Ag Suppliers’ Conference has been planned for Match 12 at the Days Inn in Meadville. The purpose is to make avail able the latest information in agri cultural engineering dealing with animal housing and animal pro duction. Topics will include fiee stall housing layout, milking cen ter design, upgrading existing fa cilities, and more. Speakers include Richard New Zimmerman Water Bowls IMPROVE YOUR AVERAGE InerMM Milk Production... Naturally! Supplying fresh water I ; I I I continuously, with I I I & instant recovery. you get more milk..at no extra cost...naturally! mountedon stanchion • 3 gallon capacity • PVC construction, Guaranteed Unbreakable Available in 2 models for both pressurized and gravity sys tems, they can be built into new, or added to existing, tie stall housing. Improve your avoragol Call today for moro Information 717/738-7365 • 800/578-1121 Pad I. Tfimaa, kc. • m Wratcw fcai • Utttz, PA 17543 er. the proceeds from the policy would be subject to the estate tax. Life insurance can provide liq uid resources to pay estate taxes. Because federal estate tax and state inheritance taxes must be paid in cash, liquid resources will be needed to prevents farced sale of assets. Proper estate planning, however, can minimize the pay ment of estate and inheritance taxes. Just as there is no shoe size that fits all persons, there is no life insurance program that fits all peo ple or situations. Before pursuing any of these alternatives, you should first consult your insurance agent and/or attorney to see that it fits into your overall estate plan Irrigation management, sprayer technoloty. and new water use regulations round out the pro gram. This year’s program has something for everyone involved in your vegetable operation. Registration will begin at 9 a.m. and the meeting will run until 3:30 p.m. The meeting will be held at the Summit Valley Elementary School, one wfle South of New Holland on Eastern School toad between New Holland Road and Kinzer Avenue. For more information, contact Jeff Stoltzfus, (717) 354-1522. Stowell, agricultural engineering, Ohio State University: Robert Graves, agricultural arid biologi cal engineering. Penn State Uni versity; and John Tyson, agricul tural engineering from Erie Coun ty Cooperative Extension. Cost of the conference is $2O and registrations must be received by March 4. For registration information, contact John Tyson at the Erie County Cooperative Extension Office, at (814) 825-0900. • Exceptional durability • Minimizes water waste WB9SG, with optional splash guard
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