Operational Transition

[Jake]

Trying to find some ideas on how to work a family hand over of an operation. Grandparents are owners of the cattle and equipment today, they own about half the ground and rent the other half from my father.

We are trying to come up with a way of passing ownership of the cowherd to me over the course of say 10 years using labor and management skills to pay for the buy in. So in essence since I have never taken a wage and am fine with continuing this in order to use what was a wage to pay for the buy in.

Not sure if this makes any sense or if i spelled it out well. I know you all will have more questions and am happy to answer them to get to some quality perspectives.

Thanks in advance

 

[M.Magis]

I think it would be beneficial to hire a tax attorney. I'm assuming that's the primary reason for the slow transition. The laws vary so much state to state, I think it would take an attorney that handles nothing but similar cases to understand it all properly.

 

[Jake]

I think it would be beneficial to hire a tax attorney. I'm assuming that's the primary reason for the slow transition. The laws vary so much state to state, I think it would take an attorney that handles nothing but similar cases to understand it all properly.

Decision for slow transition has nothing to do with taxes. Grandparents are not ready to be done and I want more skin in the game. Essentially wanting to transition into a partnership without coming up with $300,000 to buy half the herd.

 

[bball]

Nevertheless, I would definitely talk with an attorney. 300k is a good chunk of money..you want to make sure it's done properly to protect you, your grandparents and the family partnership.. a couple grand to an attorney is money well spent in your situation. :2cents:

 

[TCRanch]

There are a lot of contingencies: Is your grandparents' estate currently in a Trust or LLC? And are there siblings or other family members (aunts, uncles, cousins)? I agree with bball; consult with an attorney, preferably one that has Ag experience.

 

[Jake]

There are a lot of contingencies: Is your grandparents' estate currently in a Trust or LLC? And are there siblings or other family members (aunts, uncles, cousins)? I agree with bball; consult with an attorney, preferably one that has Ag experience.

Currently in a trust, none of us are really sure how it is set up as they won't discuss with anybody in detail because they are scared of hurting people's feelings. We will consult a tax attorney and get things done correctly when that time comes. At this stage we are looking for ideas on how to do it fairly, % of calf crop in payment, form and LLC and earn shares of the corporation. These are the things I am interested in hearing peoples opinions. IMO we need to have talked through some options and have a plan before we go to a lawyer.

 

[Commercialfarmer]

I don't see how you can begin to have an idea until you know how things are structured. ******


I know you didn't ask for opinion on this, but its worth what your paying for it- I don't intend disrespect toward you or your grandparents, but I think lack of discussing end of life matters creates way more problems than getting it all aired out.

I know how things will work if I out live my parents. It wasn't a hard discussion and it helps to know how to execute their wishes. Its a talk grown ups need to learn to have. I plan on doing it if I live that long.

 

[cow pollinater]

I don't mean to sound harsh but go talk to the bank and buy in for as much as they'll loan you. Forget about what you've put in so far, it's a family business and you're part of the family. You'll show the bank that you care about it and they'll want to work with you because you showed that you care.
If you do it that way there are no hard feelings, it's yours to do as you want with and nobody can point any fingers because you were the one that cared enough to hang your a$$ out there and buy in.
If your grandparents are going to have a tax problem with you buying in then ask them to expand and manage what they buy for them until you're able to buy it.
You'll love it more if you make your own way. ;-)

 

[Dave]

Take your payment for work in the form of calves. I would make those calves heifers. And they might happen to be replacement quality heifers. Brand them with your brand not a family or ranch brand. In 10 years all of the cows will be yours. But consult a good estate attorney because my methods don't always stand up in a court of law.

 

[Jake]

Take your payment for work in the form of calves. I would make those calves heifers. And they might happen to be replacement quality heifers. Brand them with your brand not a family or ranch brand. In 10 years all of the cows will be yours. But consult a good estate attorney because my methods don't always stand up in a court of law.

This is sort of the path we have been headed down. Wasn't sure if we were the only ones to think this way.

I like the idea of just borrowing the money and buying in only as far as the fact that I don't see today as a good time to borrow money on high dollar cows and a toppy feeling market. Have a hard time paying retail on cows that are only worth $1000 at any point as a canner. They don't make many interest payments that way.

 

[greybeard]

Take your payment for work in the form of calves. I would make those calves heifers. And they might happen to be replacement quality heifers. Brand them with your brand not a family or ranch brand. In 10 years all of the cows will be yours. But consult a good estate attorney because my methods don't always stand up in a court of law.

That's certainly the old way of doing it and several of the most 'famous' cowmen in history started their ranching endeavors that way.

 

[Commercialfarmer]

If caught, the IRS would see the exchange of cattle as either a gift or payment for services and want their cut. Having dealt with them, I'm sure they'll figure in the option with the highest rate.

The land poses a major problem for that kind of plan as well.

If the tax code was simple, you could traverse it yourself. But that's not our reality. Find a good attorney. A good honest one is worth their pay.

 

[Named'em Tamed'em]

I think it would be beneficial to hire a tax attorney. I'm assuming that's the primary reason for the slow transition. The laws vary so much state to state, I think it would take an attorney that handles nothing but similar cases to understand it all properly.

X 2

 

[lavacarancher]

IMO several folks have hit on the right answer and that is see an attorney. There are several loopholes available to you and you should take advantage of them. I just went through this a few years ago and it was set up where the transition was very easy and there was no tax liability what-so-ever. Didn't even have to go through probate because I owned everything long before my Mother passed.

 

[bbirder]

I think it would be beneficial to hire a tax attorney. I'm assuming that's the primary reason for the slow transition. The laws vary so much state to state, I think it would take an attorney that handles nothing but similar cases to understand it all properly.

X 2

x 3

Hire a professional to guide you and it won't come back to bite you later. :2cents:

 

[TexasBred]

I don't mean to sound harsh but go talk to the bank and buy in for as much as they'll loan you. Forget about what you've put in so far, it's a family business and you're part of the family. You'll show the bank that you care about it and they'll want to work with you because you showed that you care.
If you do it that way there are no hard feelings, it's yours to do as you want with and nobody can point any fingers because you were the one that cared enough to hang your a$$ out there and buy in.
If your grandparents are going to have a tax problem with you buying in then ask them to expand and manage what they buy for them until you're able to buy it.
You'll love it more if you make your own way. ;-)

Yeppers....3rd party financing with everything on top of the table. Grandparents can always reserve a lifetime estate which will allow them to live on the property until they pass away or move off. No feelings hurt, no questions asked, no backing out or changing the terms. Just you and the mortgage company.