View all past Braintrust Ag newsletters here.

Edition #43

September 21, 2024

Good morning and welcome to the Braintrust Ag newsletter. Where we give you the push you didn’t know you needed to dive into building and transitioning a better ag operation.

A couple notes to begin:

• I figured out how to offer a free 7-day trial membership to the community

  • 🔗 www.braintrustag.com/join

• If you haven’t seen the revamped community platform w/ easier access to the many downloadable tools, check it out here: 🔗 www.braintrust-ag.circle.so/feed

• A bunch of people have asked me lately for accountants & attorneys who understand ag. There’s a handful listed here: 🔗 www.braintrustag.com/pro-providers/ and if you provide professional services to agriculture, consider applying so we can send more referrals your way.

Alright, let’s get to the topics that will help you build & transition a strong, sustainable ag operation.

-Clint

Here’s what we have this week:

• 💸 Enterprise → Whole Farm Budgeting

• 🌱 Seeds

• ⚖️ Revocable Trusts

• 📅 Happenings

• 👨‍👩‍👧‍👦 Succession Structure

• and more…

THE BIG IDEA

BA Pro Manager Series

#10: Enterprise → Whole Farm Budget

Sure, you’re sick and tired of hearing the phrase, “know your numbers.” But the reason it’s annoyingly said over and over again is because it’s pretty spot on. In the ever-changing world of agriculture, having a clear handle on your finances is crucial for long-term success.

And the best way to get a handle on finances is being in control of where those dollars are being spent. In other words, telling your money what to do versus merely reacting.

That's where enterprise budgeting comes in. It’s not just about crunching forecasted numbers—it's about assigning a job to every dollar and ensuring that each part of your farm or ranch is pulling its weight. By tracking income, expenses, and profitability at the enterprise level—whether crops, livestock, or off-farm work—you can make smarter decisions that optimize your operation's overall performance.

But viewing each enterprise in a vacuum won’t do anybody much good. You’ve got to roll all those numbers together to look at the ag operation as a whole. That includes things like overhead and off-farm income/expenses.

So how can you do that? That’s the topic of this post⤵️

*For this post, I created the most robust tool to date… even spent a few hundred bucks building it.

Don’t want to read the post but still want to download the Braintrust Ag Whole Farm Enterprise Budget? Click the button below.

SEEDS

• 🌪️ Transition Storm: This piece outlines many of the challenges facing the ag industry regarding transitions an highlights the needs for realistically evaluating where the farm/ranch/business stands and why planning is so important.

• 🌥️ Looking Ahead: Here’s some advice, based on past experiences, for farmers looking forward to 2025 after the bleak price environment many commodity producers are experiencing.

• 🚨 Stay Vigilant: Just because we live in rural parts doesn’t mean we’re immune to crime. There’s been a number of scams targeting rural, especially elderly, residents and this article provides some awareness and tips to pass along.

• ✂️ Fed Cut: You’ve probably heard the Fed recently cut rates by ½ a percentage point. Here’s some additional context and how that might provide some relief for upcoming loan renewal season.

• 👨‍👩‍👧‍👦 Next Gen: If we want to continue the family farming legacy, sometimes the owner generation might need to ask that next generation to come back to the farm, according to this story.

REVOCABLE TRUSTS

Revocable trusts can be a valuable estate planning tool for many families within agriculture, but it’s important to understand both their limitations and the key benefits they offer.

What Revocable Trusts Don’t Do:

• No protection from creditors: Your property remains vulnerable to claims from creditors.

• No immediate tax benefits: There are no upfront tax advantages to setting up a revocable trust.

Key Benefits of a Revocable Trust:

When properly funded, revocable trusts provide several advantages that are particularly beneficial for farmers looking to secure their assets and simplify estate management:

• Avoid probate: Assets can be transferred to your heirs without going through the lengthy and expensive probate process.

• Maintain privacy: Unlike a will, which becomes public record, a revocable trust keeps your estate matters private.

• Smooth asset management if incapacitated: Should you become unable to manage your farm or other assets, a designated trustee can take over without court intervention.

• Immediate availability of assets upon death: Your heirs can access the assets right away, ensuring that your farm continues to operate without interruption.

In Simple Terms:

A revocable trust serves as a detailed set of instructions for how your assets should be managed during your lifetime and distributed after your death. For ag folks, it can be an essential part of ensuring a smooth, private, and efficient transition of the family operation.

Become an Exclusive Member today for access to everything. It’s a small cost and you can even try it out FREE for 7 days!

PEER GROUP HAPPENINGS

A few mentions on what Braintrust Ag members are up to:

1) New Recordings

I’ve posted a few new recordings from past Expert Q&A’s in the Media Space.

There’s over 11 hrs of content, questions being answered, and insights from experts on topics covering succession planning, FSA loan programs, grain marketing, crop insurance, agritourism, starting a farm from scratch, ag lending, 1031 exchanges, and more.

2) Downloadable Tools are now much easier to access

We’ve spent the past month reorganizing the various tools & resources to make it easier and more effective for members to find what they need.

Access The Tools Library Here

3) POLL: What topics should we cover in the next few SOIL Gatherings?

If you get value from these newsletters, consider joining 300+ other ag people and become a member of Braintrust Ag. Your support makes this content possible.

*ONE* (of many) TRANSITION APPROACH

For many farm families, the bulk of their wealth is tied up in land and farm assets. When only one child plans to return to the farm, it can create challenges in planning a fair inheritance while ensuring the family farm remains viable. One option to address these issues is to use a combination of a Joint Revocable Living Trust and a Limited Liability Company (LLC) to smoothly transition the farm operations and land.

Here’s one (of many) approach to consider when dealing with farm succession planning:

The Goals:

1. Gradual Transition of Operations
   Transition the management and control of farm operations gradually during the parents' lifetime to allow the on-farm child (Farm Kid) to take over without a sudden, overwhelming change.

2. Preserve the Farm’s Financial Viability
   Keeping the farm financially stable is key, especially when the primary income and assets are tied to the land and operations. This ensures the farm remains productive and profitable for future generations.

3. Provide Equitable Inheritance
   Finding a way to leave a fair inheritance to both the Farm Kid and the Off-Farm Kid is crucial. The aim is to ensure the Off-Farm Kid isn’t left out, while giving the Farm Kid a chance to continue farming.

4. Secure Retirement for Parents
   Parents often need income after retiring from farming. A well-structured plan ensures that they can draw rental income from the land while Farm Kid operates the business.

5. Farm Kid Independence
   Providing opportunities for the Farm Kid to acquire or lease land independently can reduce potential future conflicts and give them more control over their farming career.

6. Keep It Simple
   Farm succession plans can get complicated fast. A straightforward approach using a trust and LLC can keep things manageable while covering essential bases.

The Plan:

This strategy involves setting up two key entities:

• Joint Revocable Living Trust
  The land is placed into this trust. The trust can stipulate certain conditions, like a Right of First Refusal (ROFR) or option for the Farm Kid to rent or purchase the land. This way, Farm Kid is given the first opportunity to keep the land within the family farm's operation. If the Farm Kid exercises the option, the funds from the land sale or rent go to the trust, ensuring that both heirs benefit.

• Limited Liability Company (LLC)
  The operating assets of the farm—cattle, crops, equipment, and leases—are transferred to an LLC. During the parents’ lifetime, they hold ownership in the LLC and can gradually transfer shares to the Farm Kid. Upon their passing, the LLC fully transitions to the Farm Kid, giving them complete control over the farm's operations while keeping the land ownership separate.

How It Works:

• Land Ownership and Leasing
  The land remains in the trust and is leased to the LLC, which controls farm operations. This setup allows the Farm Kid to manage the farm operations while renting the land from the trust. This also generates rental income for the parents during retirement and ensures that, upon their passing, the land is dealt with according to the terms of the trust.

• Farm Kid’s Ownership in the LLC
  Over time, the Farm Kid earns ownership in the LLC, eventually becoming the sole owner after the parents pass away. This gradual transition helps them build experience and confidence in running the farm while maintaining a structured transfer of assets.

• Equitable Distribution to Both Kids
  The land stays in the trust for a set period (e.g., 10 years), with the Farm Kid having the first right to buy it. If they do not exercise that option, the land can be divided or sold, with proceeds distributed equally to both Farm Kid and Off-Farm Kid. If Farm Kid buys the land, the Off-Farm Kid receives a cash equivalent, ensuring fairness.

What This Approach Doesn’t Cover:

While this plan covers many aspects of farm succession, it does not protect assets from long-term care costs or ensure the land stays in the family for multiple generations. For additional protections, families may need to consider more complex tools, like irrevocable trusts or special family agreements, depending on their long-term goals.

The Benefits of This Approach:

• Simplicity: By keeping the land and operational assets separate, the plan becomes easier to manage and execute. It also reduces the risk of conflicts between heirs.

• Fairness: Both Farm Kid and Off-Farm Kid receive a fair share of the family’s wealth, whether through land or cash.

• Control: The Farm Kid has the opportunity to gain control over the farm’s operations and eventually buy the land, ensuring the farm can continue.

Succession planning is challenging, especially when family wealth is tied up in assets like land. However, by using an LLC for farm operations and a trust for land ownership, you can create a clear pathway to preserve the family farm while ensuring all heirs receive their fair share.

*These things can get complicated fast, so consult an attorney. As always this isn’t legal advice.

MEME OF THE WEEK

That’s a wrap, folks.

Until next time, thank you to everyone involved in ag.

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DISCLAIMER: All content, communications, and resources provided by Braintrust Ag, its principals, operators, or members is intended to merely be educational and entertaining. Nothing published by Braintrust Ag should be relied on as legal, financial, investment, or other professional advice. Investments and legal matters involve substantial risk and are not suitable for all individuals. It is recommended to enter into a client relationship with a Pro Provider for obtaining professional advice.