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[00:00:00] Mike Howell: The Dirt with me, Mike Howell, an ekonomics podcast where I present the down and dirty agronomic science to help grow crops and bottom lines. Inspired by ekonomics.com farming’s go-to informational resource. I’m here to break down the latest crop nutrition research use, and issues helping farmers make better business decisions through actionable insights. Let’s dig in.
Well, hello again, listeners. Glad you’re tuning in this week. Kind of going a little bit away from the agronomy topics. Today we’re gonna be talking about estate planning, something that a lot of our listeners need to pay attention to and may need to do a check-in on yourself and make sure you’ve got things planned where you need them to be.
To help us do that, we’ve got Mike Downey with Uncommon Farms with us today. Mike, welcome to the Dirt.
[00:01:02] Mike Downey: Hey, thank you, Mike. Glad to be here. Looking forward to it.
[00:01:04] Mike Howell: Mike, if you will, take just a few minutes and introduce yourself to our listeners and let ’em know what you do.
[00:01:08] Mike Downey: You bet. Yeah. My background, I’m born and raised on a family farm.
West Central Illinois is where my family farm was, and my story is I didn’t have the opportunity to go back to the farm probably. Who knows, maybe like a lot of your listeners, the farm just didn’t support me at the time, back in the late nineties. Still remember the price of corn was about a dollar 80 a bushel.
That took me off into the professional industry to eastern Iowa, where I’m still at today. 25 years later, discovered secession planning along the way, took an interest in that area, and that’s what I’ve been doing ever since, is just really helping family farms every day figure out this whole secession planning dilemma.
[00:01:45] Mike Howell: Okay. Well, Mike, before we get into that, we mentioned that you’re with Uncommon Farms. Tell us a little bit about Uncommon Farms and what Uncommon Farms is all about.
[00:01:54] Mike Downey: First off, step back, I was out more independently in the last seven, eight years. Along the way, created another entity that I’m still part of too that I’d like to mention.
It’s called NextGen Ag Advocates. Actually found it from two farmers. One of those did not have a successor to carry on his farm, and he found a young couple in the community to transition to. So the whole story about NextGen that’s still out there is we have a matching program to help connect young and beginning aspiring farmers up with retiring farmers without a successor or maybe just an operation.
Is looking to bring in a key partner. But along the way, several of the farms I’ve worked with have joined Uncommon Farms, which is different. It’s helping farms more holistically with the whole all phases of the operation, not just secession. And that’s a theme and a trend I’ve observed a lot here, especially recently, is more and more farms just don’t want to go at it alone.
And having help just to fill in some gaps maybe where they’re weak to really work on the business or the financial part of it, the people part of it with. Human resources and each farm gets a coach and each farm gets a financial consultant. We have a number of different peer groups, just really a community of farms that they’re trying to support one another, learn from one another, and then be better with their own businesses.
[00:03:08] Mike Howell: Sounds like some more interesting information that people may need to check out. Do you have a website people could go to if they find something interesting in today’s presentation that we need to go look up?
[00:03:17] Mike Downey: Uncommon farms.com for those that are interested in the NextGen with the matching and the non-family transition planning we’re doing, that’s at NextGen AG us.
[00:03:27] Mike Howell: We’ll talk about that again toward the end of the episode and make sure we give our listeners another chance to get those websites. Mike, what we wanted to focus on today was succession planning. I hear a lot of people talking about that, and I travel around the country and see a lot of farmers visit with a lot of farmers.
From face value. It seems like a lot of these farmers are planning to pass the farm down to their all their children, and they may even have the children working on the farm. But if you really get to looking, and it’s still the farmer that’s making these decisions, the children aren’t really allowed to make decisions.
It goes that way for a long time, and sometimes they kinda get frustrated and leave the farm. Why do things like this happen? Why is it so important that the older generation lets the younger generation have a part in making some of these decisions?
[00:04:09] Mike Downey: It’s an interesting phenomenon that I don’t know that I have a perfect answer for.
I just met with a family this week that the generation in the middle that’s doing all the work in their fifties, and one of them is even in their low sixties. When I looked at them, they truly don’t have full control and management of the operation because sitting at the end of the table was their folks in their late seventies that.
Are still very much part of the operation. It resonates something I saw within my own family farm, so it’s certainly something that’s out there. I don’t know. It’s an interesting thing. I think everyone has a little different answer, maybe Mike, but I think what I’ve observed that patriarch generation, my grandparents generation, if you will, that really went through some tough times and their farming careers.
A lot of them started them from scratch. The old adage, it can lose the farm as many times run the risk of losing it as much of anything. And going through the eighties, that farm crisis and all of that, they’ve really, in some cases fought foot and nail just to keep it maybe hard just to give up all of that, that they spent their whole farming career building in some cases just trying to preserve and holding it together.
[00:05:14] Mike Howell: I definitely understand that doesn’t take long to lose what you’ve worked your lifetime building up, Mike, I’m often reminded of a quote from Benjamin Franklin. It says, failing to plan is planning to fail. I don’t think of a instance that that could be more appropriate than in estate planning. We have to anticipate where things are going, look for challenges, and then take actions to increase the probability of a success.
Talk about a little bit why this is especially true and when we’re looking at passing the farms down from one generation to the next.
[00:05:42] Mike Downey: This year I’ve been really trying to change my messaging to focus on the positive. What are those common trends and traits, characteristics of farms that are figuring out this whole succession thing?
And one of those right at the top for me is that farms understand and they prioritize succession planning. Over estate planning and that they recognize that there’s a difference of the two. Because estate planning, in my opinion, is just one component of an overall comprehensive plan. But estate planning for the most part, plans to transition assets after death, whereas in succession planning where we’re able working farm, what can we be transitioning now, roles and responsibilities, day-to-day management and the people part of it and all of that, the skills and responsibilities.
So when people ask me. When should we get started on secession planning? I say from day one. Day one that you start your business, and my dad and uncle farmed together for 35 years under a family corporation. But quite frankly, that corporation was set up for tax reasons back in the early eighties, not with a whole lot of thought for the long term secession of the farm.
[00:06:45] Mike Howell: Right, and there’s a lot of people in that same situation, Mike, when we talk about estate planning or succession planning, whichever way we’re wanting to go with that, there’s a lot of different ways we can go. I’ve heard people talking about, well, it’s set up in a wheel and the wheel’s going to dictate where the land, property, everything goes.
I’ve heard of people setting things up in a trus. I know there’s several other different ways. Talk about some of the ways that this can be set up and structured when people start planning.
[00:07:10] Mike Downey: Sure. Yeah. A lot of misconceptions, different perceptions of trust. Some people hear that word trust, and it’s like this scary thing that we really want that.
But probably the most common trust that I’m working with today with families is what’s called a revocable. R Living Trust, it’s a living document that those that put it together, it could still change and revoke and amend. No different than a will. You really have two options to transition your assets of death, and that’s a will or a revocable trust.
And the only really difference between the two is what’s something called probate with a will that a state’s gonna go through a formal probate process. It’s a matter of public record out there at the courthouse, and there’s usually some time delay involved and administration costs, court costs. So for folks that have had a bad experience with probate or want to avoid that or keep their estate planning more private just within their family.
That’s where you’re seeing trust, like revocable living trust become more common and the owner of that trust still owns and controls everything. And that trust doesn’t provide much for protecting the farm for that matter ’cause it’s a revocable document, a living document that they can still change and have full control of.
It’s just really the simply the difference of trying to avoid probate that would otherwise be triggered with a will.
[00:08:25] Mike Howell: Mike, what about taxes? Is there any benefit to one system or the other? When we look at capital gains taxes, I know that’s a big topic these days and a lot of people are trying to get that overturned where we don’t have capital gains taxes that may have been addressed in some of the recent legislations.
What can you tell us about that?
[00:08:42] Mike Downey: You bet. So as a general rule, my observation of the practitioners out there are legal and tax advisors. As a general rule, a lot of the planning out there, the estate tax planning is to wait till after death because of a key tax law that allows a step up in basis of assets at death when they’re passed through the estate and inherited all of your assets get appraised because of the federal government.
You wanna know if you owe any federal estate tax. The good news is, is the one big, beautiful bill just made those exemptions permanent. It’ll be starting in 2026. It’ll be 15 million. Per individual or $30 million for a married couple before you have to worry about any federal estate tax. So that step up in basis thing is something that, the other side of that is not every family farm prioritizes waiting to get a step up in basis as the number one priority, either because in a lot of cases the patriarchs might be passing the day-to-day operations over to the junior generation, but still holding all the equity.
We’re asking our junior generation to keep doing what we’ve been doing, but now with no equity ’cause we’re still gonna hold it. ’cause our tax laws incentivize us to wait to transfer after death. So we try to have that conversation with folks to really understand, take a step back what this really looks like, what’s the financial feasibility of it, what equity can we still transfer today prior to death to help that junior generation keep carrying that farm forward.
[00:10:03] Mike Howell: Mike, I was reading something on LinkedIn a couple of weeks ago that you had published there and it was talking about instead of waiting to inherit a farm, it may be better off for an individual to go ahead and purchase part of that farm. Talk a little bit about what you mean by that. I’d never thought of it that way.
[00:10:19] Mike Downey: Yeah, that article got a little traction out there and it really is kind of a segue or compliments what I was just alluding to. Oftentimes, if I’m speaking to a group of farmers, I’ll ask ’em to raise their hands. How many have bought a farm under a traditional installment, a private contract with that landowner, and usually only one or two hands are raised When I ask that question, because most of the farms today are transitioned through some sort of a public venue and auction.
Even virtual auctions, but private installment sales is something that we use still a lot in family farm transitions because that is a way to transition some equity. Easy example I can give Mike is if it’s a $10,000 an acre farm. If we sell it to our junior generation for 5,000, we set that up on an installment.
We can still maintain mom and dad’s income through the land payments through that installment, but that $5,000 discounted price is equity that transfers to the junior generation to help them when they sit down and have conversations with their lender and so forth, and to help them carry that operation forward.
[00:11:24] Mike Howell: Great advice there, Mike. Something I had never thought about and something we may need to look into a little more. Mike, I know you post a lot of information on social media similar to that. Hopefully we’ve sparked some interest in our listeners today. Talk a little bit about where you’re at on social media, where somebody can find more of your information that you’re posting.
[00:11:40] Mike Downey: I can only really handle one of ’em. To be honest with you, Mike, I don’t have the bandwidth to manage multiple. I’ve focused primarily on LinkedIn, so I just truly try to post valuable information. It’s not a sales pitch out there two or three times a week. Otherwise, you can find me through those websites I mentioned before on common farms.com or NextGen ag.us.
You can find me through those channels as well.
[00:12:03] Mike Howell: Mike, I thought I was the only one in the world that only had one social media platform. I’m on LinkedIn and that is it, but I’m glad to see somebody else’s protesting as much as I do.
[00:12:12] Mike Downey: You bet.
[00:12:13] Mike Howell: Mike, we’ve kind of hit the highlights of a lot of topics here talking about estate planning today.
Do you have any closing comments or anything that we may have missed that we need to touch on a little more?
[00:12:22] Mike Downey: A question I get a lot is where to start. How do we even get this conversation started? And one thing I like to encourage folks is just to take a step back, ignore all the tax laws and what you’re seeing your neighbors do and what you’re hearing about and just take a step back.
In a perfect world, what’s this look like in the future? Really prioritize what your long-term goals are, identify what the concerns are, the pain points and issues, and really just upfront, kind of prioritize that. ’cause then we can create a roadmap and then we can start getting into the weeds of talking strategies of.
Should you have a will or a trust, or does your farm benefit from an LLC or other things that we are using a lot? Don’t get me wrong, they all are good tools for different reasons, but a lot of times I think people put these structures together and they haven’t really taken a step back and understand why do we do this and really understand why we’re doing these things and what’s really important long term.
[00:13:16] Mike Howell: Mike, if I had to guess, I would say the reason they do that is because that’s the way dad did it and the reason dad did it is the way grandpa did it. That’s the way most things happen in the farming world and I couldn’t agree more. We kind of need to get away from that and at least understand why they did it that way.
[00:13:31] Mike Downey: Yeah, absolutely.
[00:13:32] Mike Howell: Well, Mike, I really hope our listeners have enjoyed this. I hope it made ’em think a little bit and if they haven’t got some plans in place, maybe it’ll spur some interest and get ’em to think about that a little bit over the winter months. Anyway, have a lot of downtime during the winter and maybe they can get something working.
Mike, we really appreciate you taking time to visit with us today. Listeners, we appreciate you tuning in and if you will hang around for just a moment and we’ll be right back with segment two. Farming Isn’t farming without questions, and now there’s a place to go for answers. At economics, an entire team of agronomists is waiting and ready to help for free.
No question is too big or too small. Visit Nutrien-ekonomics.com and submit your question with the ask an agronomist feature.
Listeners, welcome back for segment two. Today’s question on our ask an agronomist section is going out to Dr. Alan Blaylock. Alan, We’re glad you’re back in the studio with us today. Welcome back.
[00:14:30] Alan Blaylock: Thanks, Mike. Good to be here again. It’s always a pleasure.
[00:14:32] Mike Howell: Alan, the question of the week is, is it acceptable to apply enough fertilizer for multiple crop years at one time if the prices are low?
[00:14:40] Alan Blaylock: Sometimes that is an acceptable practice. We’ve talked before about timing of fertilizer and when we can apply what sources and what forms and what nutrients, and so that again, comes into play here. Typically, for some of our immobile nutrients, we’re talking about p and K and some of the micronutrients that we can actually.
I’ll use the term bank in the soil. We can apply multiple years worth of that nutrient, build up our soil test level, and then the crops can feed off of that for multiple years. In the corn belt, it’s fairly common to apply fertilizer for the entire corn soybean rotation in one year on the corn, and then it basically saves a past during the soybean year, and that is generally an acceptable practice.
Again, thinking about what we’re trying to accomplish there, we’re trying to. Kind of recharge that nutrient bank when we do that. And then we’re going to allow multiple crops. In the case of corn, soybean, we’re going to allow two crops to feed off of that application. Some concerns, and maybe where we don’t want to do that, if we have soils, and we’ve talked a bit about this in relation to fall versus spring applications, if we have soils where nutrients can be lost, Sandy soils where potassium.
Maybe leached or soils that have a high phosphorus fixing capacity or these kinds of conditions where it’s probably less advisable to apply multiple years worth, more of those nutrients may be lost or get tied up. And so those may be conditions where we may want to apply on an annual basis. Sometimes if we’re growing.
In very high yield environments, there can be an advantage of applying the nutrients closer to the time of crop uptake, and we might see advantages one way or another with spring versus fall applications. But generally speaking, applying multiple years worth at one time with our immobile nutrients is acceptable.
It’s not advisable with nutrients like nitrogen or sulfur, which are mobile and can be lost from the soil. We don’t want to try to build those up because in many environments we can’t really accumulate those nutrients. We’re just going to create potential for loss and inefficiencies. But for the most part, our p and k applying for multiple years is generally an acceptable practice.
And you look at the research and you see very few differences between an annual application or a biannual or multiple year application.
[00:16:57] Mike Howell: Alan, one thing that comes to mind on that, and I know you’re familiar with this, in my part of the world, we have a lot of pine trees. Talk a little bit about how they use the fertility in the pine forest and when they make those applications, it kind of ties in nicely with this topic.
[00:17:11] Alan Blaylock: That’s a special case and one thing to recognize about trees. Trees in general, but pine trees specifically, those trees are very effective at taking up nutrients. They hold them in the plant material at the end of the season before they drop leaves or needles. Relocate those nutrients back into the wood and store it there.
In the case of these pine forests, and I’ve worked with some of those groups a number of years ago, and it was quite a learning experience to see how they manage that. And in those cases, yes, we can apply nutrients for 5, 6, 8 years in some cases. Because those trees are so efficient at utilizing those nutrients and they don’t apply high rates anyway, but the trees are good scavengers and they’re very efficient at taking it up and recycling it year to year into the wood and back into the growing tissue, and getting very efficient use outta those nutrients.
So that’s kind of a special case with a different kind of crop and really behaves quite a bit differently than our annual field crops.
[00:18:08] Mike Howell: Alan once again, we appreciate you sharing your knowledge with us. Listeners, we appreciate you tuning in this week, and as always, if you need more information on anything we’ve talked about, you can always visit our website.
That’s Nutrien-ekonomics.com. Until next time, this has been Mike Howell with the Dirt. Hey guys, if you like what you heard today, do us a favor and share this podcast with someone else. It could be your neighbor, your friend, your crop advisor, or whoever you think would enjoy it. Your support helps ensure future episodes, so please like, subscribe, share, and rate the show wherever you’re listening from.
