Perfect. So, I literally titled this episode The Estate Planning Stuff You Need with Shannon Ferrell.

We can do that. We can do that.

Thank you for having me! It's great to be here.

Yeah, we're super excited. You've had a pretty busy day today.

I was just saying earlier, I think they may have gotten their money's worth out of me. We've done two Cattlemen's College sessions, we did a general session, so we've been talking transition planning all day long.

And I think that's your happy place, honestly.

It's true. If you put a quarter in the Shannon Ferrell jukebox, that's the song that's going to play out.

Awesome. Dr. Ferrell, can you tell our listeners a little bit about yourself?

Yeah, so I grew up on a little wheat and cow calf operation in western Oklahoma, near the town of Leedy. Was lucky enough to be a farm kid during the farm crisis of the 1980s. My dad said, "Never come back to the farm. This is no way to make a living." And so I kind of, sort of rebelled by getting a degree in Ag Econ. Got my bachelor's and master's at OSU, went to law school and was in private practice for a while before I came back to OSU. And so now I've spent about half my professional life working on farm transition issues.

Awesome. What is your technical title at OSU and what is your day-to-day look like there?

So I'm a professor in the Ag Econ department there and we teach our undergraduate ag law class, which has gotten to be really big. We have 170 students this semester. So we've gotten to have the point where basically every ag student sadly has to come through me to get to graduation, but hopefully we make them a little bit better off for that. But most of my appointment is with university extension and so that's this, right? Reaching university findings research out to the public. And so that's kind of a function of why I'm here is that outreach component, whether that's all around Oklahoma or even around North America. A lot of my time is either in the classroom or way out of the classroom.

Well, and I can tell you from personal experience talking to former students of yours that your class has been incredibly valuable to them.

Shannon Ferrell (02:59)

I hope so.

Lynsey McAnally (03:01)

I think that's something that is greatly overlooked is having a good understanding of ag law, but also just law in general when it comes to landowner's rights and how to protect yourself. And so in my opinion, that should be something that every student takes that and some sort of financial planning class would be great.

Yes, I agree on that front for sure. Yes ma'am.

So obviously I had the pleasure of hearing you speak at Angus Convention. You mentioned then the amount of dollars wrapped up in transition. Can you expand a little bit on that?

So over the next 20 years, we're probably looking at about 1 trillion of farm wealth changing hands. That's a lot. That's a of zeros. And that's largely because we've heard for a long time that farmers and ranchers are getting older. The average age of the US farmer and rancher, according to the last census was 58.1 years. But as a result of that, we have a lot of farm wealth in our silent generation and our boomer generation operators. And we're going to start losing them sadly, over the next 20 years, which means that wealth is going to find its way to the later boomers, but also Gen X and even some of the millennial operators that are coming along behind them. And how we handle that transition has a lot of implications for the structure of our industry and honestly even the structure of our rural communities because if we do that right and we keep that wealth and farm families and keep those families operating, that has its own consequences versus that land getting broken up and maybe put in the hands of other investors or other interests as well. So us doing a good job in transition isn't just a matter of our farm families, it's a matter of our rural communities too.

And how does all of that translate into actual viable transition plans? I

Think what's most critical for people to understand is that the best time to have started your transition plan was probably yesterday, but the second best time is today. And the sooner you can get started, the better. Because time can either be your enemy or your ally in this process, the more of a time horizon that you have to get your farm into the hands of the next generation, the more tools you have available and the more powerful those tools become. But if we're doing this behind the eight ball and we're doing this from our emergency room bed in the hospital, we don't have that many options available to us and we run a much greater risk of the transition not succeeding if we're trying to do it in a hurry all at the end or even after we're gone.

Sure. And you just mentioned from your hospital that covid I think was a turning point for a lot of us. When we think about planning for the future and in particular transition planning, can you talk a little bit about your experience during Covid with this subject? I

Got to tell you if there was an experience that really made me even more radical than I already was about having farm families engaged with their transition, it was covid and one very specific experience. I went to the hospital where my best friend's mom was dying from Covid. She had just lost her husband the previous week, knew that he didn't have any estate planning tools in place, knew she had to do something while she still had time. And of course, this is at the height of the pandemic. So I hand her documents that I wrote in two hours, which was a world record for Shannon Ferrell anyway to an emergency room tech who took them up to her room and I sat in my car and FaceTimed her through executing those documents, praised the Lord. There was another off-duty nurse who happened to be a notary there that day.

That's lucky.

So we were able to get everything executed and honestly, I kind of broke a little that day because it just killed me that they were in that situation. And so if I was militant about everyone having their transition planned in advance before I became pretty radicalized by that experience. We had so many folks that we lost all too soon and that didn't have anything in place. And if you don't have anything in place, you're kind of begging for your farm to get broken up, and I just don't want to see that happen.

Every time you tell that story, it just breaks my heart.

Yeah, it was a hard one on me too. We can have a whole separate conversation about mental health that stems from that event.

Sure. So my next question actually is ... I want to give you some time to talk about that Farm Stress website. I know that kind of surprised you with that one.

Shannon Ferrell (07:30)

No, not at all.

Lynsey McAnally (07:31)

I think it's such a great resource and when you talk about what happened during Covid and the result of Covid on a lot of our folks in Oklahoma, across the nation really, and then we talk about the lack of estate planning and how much stress is on the average every day farmer and rancher to make their operation a success. It's enormous and there's not a lot of resources in rural America to help them with that. So Oklahoma State obviously has a new website that is out there. I say new, it's been out for how long now.

We actually had that pre-pandemic, believe it or not, when things were getting kind of rough in the ag industry in the mid-2010s. We were trying to respond to that. And it turns out that I'm really glad that we started it then because we really needed it when Covid hit.

But I think now it's more relevant than ever. And so just tell us a little bit about it, about some of the resources that are on there and about how you would encourage people to take advantage of it.

So if you Google Oklahoma State University Farm Stress, you'll be able to find that as your top result. And it's a website where we have a few different modules kind of centered around some topics, whether those are just kind of getting an introduction to mental health issues and what's the vocabulary of dealing with those, what's depression, what's anxiety, what's a substance abuse disorder, all the way to how do you manage stress on a farm, which sounds like something that we're not really comfortable with. We're not asking people to meditate on the hood of their tractors or anything like that, but it's a stressful profession. You have a lot of stuff that is just absolutely outside of your control and yet you feel personal responsibility for that. And human beings don't have an unlimited capacity to deal with trauma and stress. The way that we deal with that is usually by sharing that with somebody. But in agriculture we've made it taboo to talk about those kinds of things. So we've really put ourselves in a jam there. We hope that on that website you find tools to either help you deal with your own stress or that equip you to help a friend deal with whatever they're facing as well. We have some modules on there about suicide intervention. We have some modules about how to help a friend who's gone through a crisis, whether that's a herd loss, wildfire, tornado, those kinds of major traumatic events as well.

This is applicable to anyone really that needs these kinds of resources regardless of what state they live in.

Yeah, absolutely. And one of the things that we are really trying to encourage folks to do is - in addition to the resources we have there on the website - get some information about mental health first aid training, which is an eight-hour course where it is exactly what it says. It trains you to spot some of the signs of mental health issues and how you can help someone either directly or help connect them to resources. So that issue that may be a first aid issue now doesn't become a major trauma down the road. We also really encourage people to take a look at QPR, which is question persuade refer. That's a three-hour suicide intervention training. And again, we have phenomenal rural fire departments, rural EMS departments that are staffed by volunteers. We're at the point now where we need a volunteer mental health first line of defense as well. And as farmers and ranchers, we can equip ourselves to do that with those tools.

You talked at Angus Convention about a mental health desert, and I think that that's a really important idea to discuss as well. So do you mind kind of reiterating what you spoke about at convention in relation to that?

A mental health desert is, if you want to go with a technical definition, it's either a county where there is no mental health service provider or it's a location where you would have to drive more than an hour to find a mental health service provider. And if I were to show you a map of Oklahoma, that's basically our mental health desert. Even in our urban areas, we don't have enough mental health professionals to meet demand. So we really need to be building capacity because every piece of data out there says not just in our ag community, although it is especially acute in our ag communities, but just across the board, we have a wave of mental health issues that's crashing on the shore right now and we need people to help respond to that.

And so whether those are professionals or volunteers that take these courses, everyone has the ability to have a massive effect on the state of Oklahoma. And I think the nation at large, and you gave an example that has stuck with me at Angus Convention about no one goes to the co-op and stands around the water cooler and expresses their deepest darkest secrets. But in reality, sometimes we need to do that and sometimes we need to talk to someone. And if you can be that person for your neighbor or your family, I think what a beautiful thing to be able to do for someone.

Absolutely. And we may not do that in the public setting at the feed store, but I think we need to let our friends know that we're available to them if they need to talk to us one-on-one, because that's one of the most valuable and therapeutic things we can do is if we can talk to someone who can listen empathetically without judgment and maybe not offer advice for how to fix it, but just say, "Hey, I just want you to share with me." Just the act of sharing is incredibly important and vital to us processing that stress or that

Trauma. Sure. We might get into it here in just a little bit talking about short term health or accident policies and things like that, but is there any information out there related to I guess the statistics of how many women versus men are open to talking about these things?

So statistically ...

And that's a very strange question to ask, but I am curious because I do find that women seem to be more open to talking about their mental health and what they're struggling with ... I feel like men oftentimes will bottle that up.

I think you're absolutely right. I think sometimes, honestly, that it is unfair to the women in our lives because Mom or Wife has to be the mental health professional for her farmer ranch in addition to being the CFO and the person that manages all the other relationships. So a lot of that gets put on the women in our ag industry a lot. But I think they're also oftentimes better equipped because they have a higher level of comfort talking about their feelings with somebody and whether it's explicitly or just instinctively recognize that value. I will say that when we go to the real extreme end of the continuum that the suicide rate for men in agriculture is markedly higher than it is for women.And that's in an industry that has the fifth highest suicide rate of any industry segment in the us.

That's a stunning statistic.

And in the data it gets highlighted that the disparity in agriculture is more pronounced between men and women than it is in other sectors. And I wonder if that is just because our men in agriculture are even perhaps more self isolating than they are in those other sectors. So there really is a difference between men and women on that front for sure.

I think oftentimes women have those connections where they're comfortable talking to their friends, and I said it before, but I feel like men will bottle that up. They'll hold that in and they try to be the rock for their family, but sometimes it's okay to lean on the people that you love in your life to talk to them about these things. And so I think that's the amazing thing about the website is it really is going to help equip people if they'll take advantage, those resources to be able to talk to their loved ones regardless of whether you're a man or a woman in this industry, to be able to have that is something incredible. So we really hope so. I could wish you for offering that, but I never want to miss an opportunity to talk about those resources. So you are headlining National Cattleman's Convention. How does that feel?

A little weird for a farm kid from Leedy, Okla. who grew up in a town of 435 people and had a graduating class of 22. When you're talking to an audience that is the size of your home county, that's something your brain has to sit there and process for a second.

But how stinking cool! So tell us a little bit about that presentation this morning.

So I was charged with the task of telling us how we can have a sustainable and more importantly, a resilient ag industry to the year 2050. And resilience, I think, in my mind means the ability to snap back whenever something comes our way, whether that's an internal challenge or an external challenge. And so what we talked about today is the fact that there are a lot of external challenges out there beyond the fact that we have to massively ramp up our animal protein production to meet the demand that will be there in 2050. But there are a lot of technological changes. We have a lot of demographic shifts in the industry that we have to adapt to. So number one, we've got to be better at adapting to change. We've got to get comfortable being uncomfortable because change is going to come at us and it's going to come at us even faster than it has in the past.

The second thing that we talked about is that to adapt to that change and to become resilient, we have to build relationships within the industry, within our families, with our allies and with our consumers. That requires deep communication. And as we were just talking about, communication may not be the wheelhouse for a lot of our producers. Especially the kind of unguarded, open communication that we need for relationship building. So we have got to get comfortable building deep relationships. And then the last thing we talked about is the fact that when you're a transition specialist, you see the world through transition colored glasses. So yeah, transitions are important because we're probably looking at least at one, if not two generational transitions in most of our ranches to get us to 2050. So we've got to have the courage to do that. And that's something a lot of people are afraid of because nobody likes to think about their ranch or even a world without them in it. But at the same time, one of the greatest gifts we can give our family is starting that process now and giving them the benefit of our experience while we're still here.

That's a pretty good segue into one of the topics that I wanted to talk about today being the estate planning must haves. You've said in the past that the numbers of possessions and the size of the family in question don't matter when it comes to whether to transition plan or not. Everyone needs a transition plan no matter what their operation looks like.

A hundred percent.

Okay.

Yep.

So with that in mind, what are the building blocks that every single person needs when it comes to a transition plan?

So I break it down into six tools that no matter who you are, no matter what your family picture looks like, you need to have that stuff. Number One is if you have kids that are under the age of 18, you've got to have a guardian nomination for those kids if something happens to both of their parents, which ...

It was pretty fun to see.

That was very cool as well. But here, I just want to say this is something that young couples need to be aware of.

Absolutely. Yeah. And I think one of the greatest tragedies that we see is young couples thinking that they don't need to have a plan or don't need to add these tools in place. But along a lot of the lines that we're talking about with these six tools, if a young family doesn't have them, it's more devastating than if an older producer doesn't have them. Some older families have a bit more of a capacity to deal with what might happen if you don't have those tools in place. But young families can just absolutely be devastated if they don't.

And devastating being the word. You hear stories out there and no one wants to think about what happens if there is an accident or a devastating event. But it's not that it makes it easier if you have this transition plan in place, but there's a certain level of comfort there to deal with these tragedies. And so going back to, let's talk about what I interrupted just a second ago. No, you're fine.

So we talked about guardian nominations for kids. Next up is beneficiary designation. So if you have any kind of an investment insurance policy, bank account, whatever that lets you designate a beneficiary to receive it after your passing, take advantage of that. It's free. It doesn't have to go through the probate process. And I think a lot of people leave that tool on the table when it can be really versatile and useful for them. Number three is a springing durable power of attorney. And I know that's a lot of words to string together like ordering a skinny vanilla decaf latte at the Starbucks. But when we say springing and durable, what we mean is that power of attorney enables someone to take care of your business or your healthcare affairs if and only if you become incapacitated, which for a lot of us, that's what we want.

We don't need somebody taking care of our stuff while we're around. But if we're in an accident and we're unconscious or we can't communicate or we're just not able to take care of things for ourselves, we want that power to spring up and empower that other person to take care of those things for us until we're better. The next tool out there is an advanced directive for healthcare that tells about our wishes for end of life care organ donation and can also include that healthcare power as well. It's a lot of stuff that's scary and tough to think about, but we have got to take that load off of our family because if we don't have that tool, our family is having to make those decisions without knowing what we would've wanted. Next up, after the advanced directive, we can talk about having a will. And again, no matter who you are, what your property looks like, what your family situation looks like, we need you to have a will. If we don't have a will, our property is going to go through the intestate succession process. That's the set of default rules that divides our stuff up and it will divide our stuff. It won't keep it together for a farmer ranch.

And the example that you gave of the cow calf wheat operation that you guys ran the model on, I want to talk about that later because I really feel like that drove home for so many people at Angus Convention that if they did not have these things in place, that is the outcome.

So using our mutual friend, Garrett Reed, who was a graduate student with me at Oklahoma State University a few years ago, we built a cow calf winter wheat operation that we designed to look like what we thought would be a kind of typical Oklahoma operation, but we used data from the Kansas Farm Management Association, which has an excellent database with over 2000 farms and ranches in it to make the project as realistic as possible. And then we ran a simulation using actual net farm income data over the past 20 years to say, 'Hey, if this farm had to split itself down the middle and one on-farm heir had to buy out one off-farm heir just keeping it as simple as we could, one off-farm kid, one on-farm kid, would that farm be able to generate enough cashflow to support that buyout? And tens of thousands of simulations said 0.0% chance

That number. It blows my mind.

It did us too. And it shows that there's not enough cashflow to support that buyout, which tells us that either if we're going to put our family in that situation, there either needs to be a lot of off-farm income to support that, or we need to look for a different approach because we're putting that farm and our on-farm air and a really difficult spot if we choose that strategy. And by the way, anybody who doesn't have a will is choosing default that strategy by default, one more thing, which is a plan for your long-term care. And the reason for that is that long-term care is very expensive. It starts at the low end at $4,500/month. In Oklahoma, at the high end for memory care is $25,000/month. That'll eat through your farm balance sheet real fast. So you either need to say, 'Hey, we need to find some means of insuring against that risk, or we at least need to identify what assets we can liquidate that aren't core of the business to cover that because the odds are if you're 65 years or older, better than 50% that you're going to need long-term care at some point.

Sure. My grandmother, who is one of the sharpest individuals that I've ever had the pleasure of knowing in my life, we just went through something similar with her because she did not have a long-term care policy and she ended up needing to be in a memory care unit. And so it fell on my aunt to basically liquidate all assets in order to fund that long-term care. And thankfully they were there, but a long-term care policy would've made that much more reasonable and a lot, it would've made navigating that much easier for the entire family because it's heartbreaking to watch someone have to see their home sold and have an auction, and though she is having memory issues, she still understands everything that's happening.

It's a layer of tragedy on top of tragedy, right? And especially if we talk to our farmers and ranchers, almost universally, they'll say, 'Well, we want to keep the farm and the family and keep the family farming.' And that is a probability, again, that we're talking about north of 50% of something that can really drain our ability to pass an intact business to that next generation if we don't plan for it.

Yeah, exactly. Okay, so going back real quick, at Angus cCnvention, you were talking about guardian nominations and you challenge people to think about who they're going to choose for that nomination. So can you kind of tell us what those qualifications would be or what people need to be thinking about when it comes to not only how old their children are at this moment, but how old are the individuals who are asking to care for your child going to be when your child is 18?

That threshold question is, is this person going to react in a positive way if a kid shows up on their doorstep one day? Right. But for example, we often think about our parents, the grandparents of the child being a natural answer there.

That's the default person that everyone thinks of.

There's a preexisting relationship there. We know that they love and cherish those kids and will take care of them. And not saying that's a bad decision at all, but one thing that we kind of alluded to in the presentation this morning is that the average age of first birth in the United States is getting close to 30. We're having our kids later, which means our parents are older when we have our kids. And so your parents might be in a good position and good financial position, a good physical position to take care of your kid today. But if we're giving them a 1-year-old, what position are they going to be in 17 years when that kid is going to be a senior in high school? And so they might be in a place where just physically it's hard to keep up with a, they might be in a position to say, Hey, we raised a kid. We're really not looking to get back into that game. Sure, we love grandkids because we can play with them and then hand them back.

Sugar highs and then they go home and then?

Right. Yeah. So we might need to think about other folks that would be able to take care of that kid in that situation, and that might be friends, it might be siblings, but what we think about is no, number one, what's their capacity to care for that kid? Does the person who already has eight kids say, no, I'm good, or have they reached economies of scale? We're like, yeah, sure. One more. Why not? But we might have a friend that's unable to have kids and say, 'Well, hey, I would love the opportunity to have a child, so we need to figure out that capacity. Talk to them. Are our values compatible? Will they raise that kid in the same faith tradition that we have? Are they nearby? Would our kid have to change schools or move to even another state or something like that? But also we want to make sure that we give that person some resources to take care of that kid. So if our kiddo is going to be going to somebody else, let's explicitly acknowledge that in our estate plan and send some resources to take care of that. Kid's housing, food, medical bills, education, those sorts of things as well. And really look at it from a holistic approach

That I think was something that a lot of people in that session had not thought about before. And across the room, you could hear conversation during your presentation between those husbands and wives in the room talking back and forth and deciding, 'Okay, well what do we do when we get home?' And to me, that was the cool thing about your presentations at convention. And here too. I'm assuming that that conversation was cultivated during those sessions and people, their brains are working well, thank during those session. I appreciate that. To think about, okay, well what do we do when we get home? Let's capitalize on what we learned here and put it into motion.

An important measure of success in my line of work is if I see someone get elbowed during my presentation, I know it at least landed with somebody.

There you go. There you go. So beneficiary designations, again, one of my favorite topics in your presentations because people don't update those near enough. And when you have a big life event, a marriage, unfortunately a divorce or some other situation come up in life, you probably need to revisit those. So can you give us a few examples there?

Not just for beneficiary designations, but really with all of these tools, you said it perfectly, "a major life event". Anytime somebody gets married, somebody gets divorced, somebody's born, somebody dies. Anytime you change jobs, if you've noticed that there's been a major change in estate laws for some reason, go back and check on everything including your beneficiary designations. And the story I say that I think rings most people's bells is I had a client who got married, got a life insurance policy, obviously named his wife as the beneficiary, but then got divorced and then period, that was the end of the story. Hid not go back and change that beneficiary designation. And so that made for some pretty awkward times when his kids found out that ex-wife who was not their mom was still the beneficiary on that policy. It took a lot to get that untangled. Now, thankfully in Oklahoma, we have some statutes that help clear that up, but not all states have that, and it can be a really tough situation. So go back and make sure that stuff is updated.

I listened to entirely too much true crime to not advise people to go look at that.

Well, so let's just talk one more detail about that story. There was a letter in the file of the life insurance company handwritten that said, 'Hey, I know I divorced my wife, but it's okay. Go ahead and leave it to her !" and ron the policy written in her handwriting.

Oh my gosh. Well, you can't see listeners Is me over here pulling on my hair because that, oh my gosh, I can't even, some of the stories you have to tell I think would make people's hair stand up, honestly. So as far as going down the list of tools that are available, durable and springing power, which kid needs to be the executor of the well, and what do you need to keep in mind when you're designating your business and medical power of attorney?

So when someone is in the situation where that power has been triggered, mom or dad or whoever it is has been incapacitated, they're not gone, they're still with us, but they are incapacitated in some way. So the person who has that responsibility needs to have the time, talent, and temperament to do that. If we are talking about a farm especially, does the person who has that power know how to keep things running on a farm? And if not, do we at least have the ability of connecting them with expertise and help that can get them to that point? When we're talking about that medical decision making, you need to understand that that person is having to make what may be effectively life and death decisions for mom or dad or whoever it is with limited information and limited time to make that decision. We might say, well, we want our super lovey dovey cuddly kid to have that healthcare power because we know they're going to be the last ones to pull the plug. But if they're the kind of person that gets locked up in a high pressure, risky situation with little information, that might not be the person that we want to have in that situation. So again, with respect to all of those, I always kind fall back in that time, talent temperament, can they get there? Can they do it? And do they have the ability to deal with not only your needs, but the needs of the family who are also in a really stressful situation at that point in time?

I think you gave an example once upon a time that you had a friend who had one child that was a lawyer and one child that was a registered nurse

That's stacking the deck right there. That's ringers. Okay, so guess which one had which power, right?

Yeah, exactly. So that's a very clear example of someone being very suitable for those two positions. And I always love to mention that one. All of us typically have someone that deals with our taxes, someone that deals with our banking, someone that deals with any legal issues that we have going on in life. If you don't have those individuals, we probably need to be putting that team together. So from your seat, who would you say needs to be on that team of experts to advise whoever is coming next?

So when you're lining up your roster, I always want to start with an attorney who has a good understanding of ag issues, that understands estate planning, that understands business planning. And those folks don't exactly grow on trees. So you probably will have to do some interviewing to ask them like, 'Hey, what's your level of experience with these issues', especially the ag industry, because the ag industry has all of these unique nooks and crannies that just a general practitioner might not encounter on a daily basis. By the same token, I want to have a good ag tax professional because yet again, for every tax law out there, there's some ag wrinkle to it. If you're in the industry, we also need to be able to understand the tax implications of what we're thinking about both from an operation Then, I want to have perhaps a production consultant.

If I'm looking at changing the enterprise mix, if I'm looking at adding a new family member or expanding the operation, we need someone to help us pencil that out and see is this operation capable of that? What does that look like? And when we do that successfully, is that going to generate the level of financial performance that we need to support those families? We're probably going to have some pretty difficult conversations as a result of this. So I want to have either a mediator or at least maybe a family communications consultant to help us navigate those difficult conversations, at least at the very least, help us fight fair when the fight does break out. There's lots of other experts we can add there as well. We could talk about a human resources expert if we're trying to figure out how to plug people into opportunities on the farm, but the thing that I really want people to take away is just don't try to do this by yourself. The example I give in my presentation is that to make a long story short, during an expedition to the Antarctic, one of the physicians developed appendicitis.

This just makes me cringe,

Right? Developed appendicitis. There's no other doctor on the team. He had to remove his own appendix. You don't want to do that. You want to have someone else who's an expert at that do that for you. So don't try to do this on your own. If you have any other options, get a good team around you because what we're doing is important, right? We're talking about preserving a multi-generational legacy here. Let's not cheap out on it. Let's do it the right way.

Sure. And so again, a great transition isn't the results of poor estate planning.

And I have a friend who has this phrase that I have totally stolen, and that is ...

Those are the best phrases, by the way!

I know, right? Plagiarism's fantastic. No, he says, 'In not choosing, you have chosen'. And if we choose not to have a plan, we have chosen the plan that the succession statutes lay out for us. And split down the middle, as we talked about a little while ago, is a plan destined for failure for the overwhelming majority of our farms and ranches. So if we don't have the courage to really do something and be proactive about this, we are basically choosing to break up our farm, which I don't think a lot of people realize.

You are by default going with whatever your state's laws are, and typically those states are going to split everything down the middle. And as you mentioned earlier, when we talk about that model that you all ran it and how many times did it not work?

Over tens of thousands. Never ever did it work.

And what are people's reactions when you tell them that typically?

You kind of get this deer in the headlights look like, 'Well, that's what we were going to do, right? They're like, 'Oh, maybe we shouldn't do that now'. And I understand it's a difficult situation for a lot of our farm families because a lot of our farms and ranches don't have a lot of off-farm assets to give City Kid. And that's why you've got to be really proactive in that planning process to examine the equities that are involved there and say, 'Look, we love you guys both. We know one kid wants to come back and operate the farm. We've got to keep an intact operational asset base for them, City Kid. We're going to do everything that we can for you, but you have to recognize that might not look like - and might not have the same value as - what we have to do to keep the business going'. And part of that, which I don't want to chase the rabbit down this trail too much, but a big chunk of that is that if we're just talking about a family in town? Mom and dad both have jobs. They've got 401Ks. They might have a retirement savings and some accounts, an rv, a vacation home ...

Well, if we break those assets up, we haven't impaired the value of those assets. They split pretty well. But when we're talking about a farm and all of our assets are business assets? If we divide those assets up, we're undercutting the viability of the business itself.

Which goes back to that model.

Exactly. And that's why the model gives us the results that it does. It makes all the sense in the world.

One of my favorite analogies that you give is the Country Mouse, City Mouse-kind of analogy,. The pitfall of trying to make everything equal. You talked about that just a second ago, but is there anything else that you'd like to say when it comes to what each child will inherit?

You need to understand that the economic incentives of City Kid and Farm Kid - the on-farm heir and the off-farm heir - are really kind of at odds with each other. If I'm City Kid and let's just put ourselves in City Kid's shoes for a second ... You're telling me that you're going to give me this asset that's got some pretty significant value. I mean, the average net worth of a U.S. farm and ranch is $1.2 million. So I mean, let's just say I'm getting half of a million dollars. You want me to just leave it there? Don't cash it out, just watch it. And if I'm just talking about returns to land ownership and we're not taking into account appreciation because you told me I can't sell it, my rate of return probably looks like a CD where I could go invest that money in. Let's say the S&P 500 can make a way better rate of return, but you want me to sit here and not do anything with it?

Yeah, it feels like - for a lot of people - that they're sitting on their hands in that situation.

Yeah, exactly. We're asking them to ignore their economic incentives. I never want to bet against somebody following their economic incentives. So if we're going to do that with City Kid and we're going to say, 'Hey, we got to keep this asset base together, then let's come up with a plan for generating at least some decent returns for them on that asset so that they have an incentive to keep it there'.

And I think you also mentioned in a previous discussion that maybe it doesn't look like giving them part of the farm. Maybe it looks like giving them some other sort of gift. And maybe it's not equal to what the value of the farm would be, but it is liquid. They can do with it what they want now versus having to sit on it.

Let's say mom and dad bought a life insurance policy specifically to give to City Kid. 'Hey, we know that this is going to be equal to the value of the ranch, but we're going to structure this in such a way that you get it tax-free. It's risk free. All the value is upfront.' The monetary value might not equal the value of the assets that Farm Kid is getting, but there's risk involved with what they're getting and they're going to have to work to harness that value. It's all up-front right here for you ready to go. Sure. So there's value implicit to that too,

And Farm Kid understands the risk, but if you are not involved day-to-day on the farm, it can be easy to overlook that. And for children to feel like they're being overlooked or they're not being given that equal value.

And I think that's why it is so important that you have these conversations while you're alive versus letting people try to work it out for themselves after they're gone. We can have this conversation with our kids while we're alive to help them understand here's why we're doing what we're doing, and we can point to all sorts of research that says if people understand the rationale of a decision and feel like they got to be part of that process, they're much more likely to accept it than if it's just imposed on them. And so that conversation has just enormous value if we have it while we're alive.

But keeping in mind that it probably doesn't need to take place at Christmas. It probably doesn't need to take place at Thanksgiving, and it would probably be better for that conversation to take place in a neutral environment.

You cannot have a honest, open conversation with your family in Mom and Dad's kitchen on Christmas Day. It just cannot happen. And we honestly need to have some pretty open feedback and conversation here. And so let's do that in a neutral field. In a place that's home base so that people feel like they're at least on more of an equal footing, even if it's hard to make that completely equal, but people feel more comfortable and can be more honest in that environment.

As far as a mediator goes in that situation, would you recommend having a neutral party involved in those conversations?

If you think that this conversation is likely to get contentious? I really like that because if nothing else, a mediator can help you have a constructive, even if it's difficult, conversation. They can help you fight fair and they can say, 'Hey, a topic of conversation today is X. We're not going to get into Y. If you guys want to talk about Y, we can have a separate conversation about that.' But they can really make it a more productive conversation. And if you don't like how the conversation is going, hey, you can always blame that mediator person.

If it's in a neutral location, you can leave.

You can walk away and reset yourself.

Right? Yeah, I think that's a very healthy thing to think about. When we talk about these conversations. We talked about that team of experts earlier. Are there circumstances where you would recommend having those experts available for these conversations? Or is it a situation where it would be better to have the conversation and then kind of analyze what questions you have to take to those individuals?

I kind of like having the conversation so that you can derive a good list of questions to take to your professionals. And the way that that process works sometimes is we're going to have a family meeting, but we are not going to adjourn that meeting until we have set the agenda for the next meeting meeting and identified our action steps and our information points.

And when that's happening.

Yeah, we are going to leave with a concrete plan for what we're going to do with our next steps. And so we can ask good questions to our professionals. And that doesn't just help with the productivity of the process, it helps with managing cost. If we know what we're asking our professionals versus this kind of fumbling around ...

Chasing your tail is what it could feel like.

We're making better use of those professionals time. They're probably getting billed to us in hours.

All right. So I just have a few more things to ask you. I always love these conversations. It doesn't matter how many times I hear you speak or how many times we talk about this particular set of topics. I feel like I always come away with more questions.

Shannon Ferrell (43:34)

That's fair.

Lynsey McAnally (43:35)

But, I mean, it's great because that means your brain is working and that means you're thinking about these difficult topics that, again, a lot of people don't want to talk about. But taxes. When we talk to this audience about what taxes look like now, what advice would you have on current tax policy?

So at least as of right now, as we sit here in 2025, the federal estate tax exemption is $13.99 million, which means you can pass $13.99 million estate tax-free. You combine that with your spouse - if I'm doing my math in my head - that's $27.98 million. I think.

That's impressive, by the way, I can't do that.

I got that right. So for the overwhelming majority of our farms and ranches, we're going to come way below that threshold. However, that number does sunset on December 31 of this year. So unless Congress either reauthorizes it or passes new tax legislation, that number will snap back to what it was before the Tax Cuts and Jobs Act of 2017. Adjusted for inflation, that would be about $17 million per person or $14 million per married couple now. So again, for a lot of us, that's still more than enough. So what I tell folks is that if you want to play it safe, and let's say Congress doesn't get together and reauthorize that legislation or extend it or do something along those lines, alright, let's act like it's $17 and $14 million and plan accordingly. There are ways that we can use, for example, some AB Trust setups so that we take maximum advantage of that trust, but still make sure we have assets going to our kids and we're minimizing that tax bite. So there are things we can do even in that situation.

And that's kind of the managing risk side of things. Again, I think people get very overwhelmed when we talk about tax policy, but just reiterating that there are some ... There's a safety net there. It's just finding the right information to make that happen.

Shannon Ferrell (45:31)

Yeah.

Lynsey McAnally (45:31)

Okay, perfect. Obviously we have a new president, there's a new administration in Washington. I just did a podcast last week actually with Ethan Lane at NCBA over policy in general. What do we think is going to happen with inheritance taxes?

I refuse to make predictions about that because I can't predict anything that this Congress does. The only thing I would say, and again, I'm not saying this is necessarily predictive, but in the history of the federal estate tax, the exemption amount has never gone backwards.

Sure.

Now we have ourselves in a unique situation here where we have kind of a dead man switch. Unless Congress does something, it will snap back a little bit. But let's look at the demographic makeup of Congress. It tends to be all silent and boomer generation with just a very few Gen Xers and a very, very small number of Millennials in there. So we have older folks that probably have the estate tax on their mind. They might be thinking about their own interests in whether or not they want to walk that number back. So I feel like there's at least some historical precedent to say they will probably at least keep it stable, but stay tuned.

Okay. Did we miss anything? Is there anything you want to talk about?

I think we've run the gamut.

I think this has been a really great conversation and I think it's one that our listeners are going to really appreciate. And I will say we had the pleasure of listening to your Angus Convention presentation. We wrote a story over that, so if our listeners want to go back, I can link to that in the show notes. I'm also going to link to the mental health resources for OSU in those show notes as well. So if you would like to go take advantage of those, you can just visit the show notes and the link will be available. This podcast will also be live on Angus.org, so if anybody wants to go look at those resources there, we can link to even more out there. So I'll visit with you after on what we might be able to put there in addition to the mental health resources. I think this conversation has been wonderful, and I think that even if people have read the story that we put in one of our previous issues featuring you, listening to it brings a whole new dynamic to just the weight of making sure that you set your successors up for success.

Thank you. I appreciate that. Thank you.

Awesome. Any burning words to end it?

What I tell everybody is I know this is big and scary, and the way that you deal with big and scary stuff in life is a little bit at a time. Just start taking one little step forward. So just do one thing, get your inventory together, start looking for your tax professionals and reaching out to them, or your accounting professional, your attorney, whatever it is ... do one thing and you'll realize, 'Hey, I did that one thing. I can do one thing more.' And pretty soon you're really making some progress down the road to making this transition plan a reality.

Awesome. Alright, well, we always end Angus at Work with the same question: What is one good thing going on in your life? That can be professional. Obviously, you've got a lot going on in that realm. Or it can be personal. But what is one good thing going on in Dr. Shannon Ferrell's life?

So, I'll say the one good thing is that my wife and kid are immediately at my right hand as we're recording this podcast. I got to bring them with me. And so it's been great to share that with them because I don't usually get to bring them with me on trips like this. So it's been really fun to experience this with my family here.

Awesome. Hey, that's wickedly cool. Thank you so much for letting me track you down, first of all, and take some time at this event - as we have this singing going on in the background and everybody around us here at the booth to really wrap this up. Thank you so much for joining us!

Thank you. I appreciate it.

Awesome.

Lynsey McAnally (49:20)

Listeners, for more information on making Angus work for you, check out the Angus Beef Bulletin and the Angus Beef Bulletin EXTRA. You can subscribe to both publications in the show notes. If you have questions or comments, let us know at abbeditorial@angus.org and we would appreciate it if you would leave us a review on Apple Podcasts and share this episode with any other profit-minded cattlemen. Thanks for listening! This has been Angus at Work.