Volume 19: Issue 6 September 2017
BOTTOM LINE Sharing ideas, solutions, resources and experiences that help dairy producers succeed.
BY THE NUMBERS
Explore loan-repayment options BRUCE JONES
Webinars highlight changing weather and hoof health
Page 8 Gamagrass can reduce costs
Calf-care experts to converge
Are you prepared for a long-term health-care need?
In times such as these, when low milk prices make cash flow difficult, some dairy producers may be wishing their mortgage payments and other loan payments were lower so it would be easier to make ends Bruce Jones meet. That is a real option. Here’s an example. A producer goes to a lender for a $100,000 mortgage that carries a 5 percent fixed interest rate. The producer has the option of making monthly payments of $659.96 for 20 years or $536.82 for 30 years. Total payments for the 20-year repayment plan will be about $158,400; the 30-year repayment plan results in total payments of almost $193,300. Because the 20-year repayment plan amounts to total payments that are almost $35,000 less than payments for the 30-year plan, the producer chooses the 20-year repayment option. That makes the monthly payments $659.96 or $123.14 more each month than the $536.82 monthly payment for the 30-year loan. The producer’s decision to go w i t h t h e 2 0 -yea r
Table 1: Loan balances and cash reserves for repayment options
repayment makes economic sense in that it results in less total interest costs. But that decision also puts the producer into a more vulnerable position regarding monthly cash flows. Paying $659.96 per month – versus the $536.82 in the 30-year payment plan – makes it more difficult for the producer to maintain a positive cash flow each month. If monthly cash flow is tight in the mid-term to long-term, a producer should probably elect a 30-year repayment plan rather than the 20-year plan. As cash flow allows, the producer can always choose to pay extra funds on the 30-year mortgage to retire the debt ahead of schedule. Another option is to put that extra money into an interest-bearing cash-reserve account that can be tapped into in the future to cover short-term deficits in cash flow. It’s this flexibility in the use of cash that makes lengthening repayment periods on mortgages, and other debts,
an appealing option. Table 1 shows how our producer’s financial situation will be affected depending on whether the producer pays $659.96 per month for 20 years, or pays $536.82 per month for 30 years and deposits $123.14 per month in an account earning interest at 2 percent. In the first case, the producer’s outstanding balance will drop to about $62,200 in 10 years. During the same period, the loan balance will only drop to about $81,000 if the 30-year repayment plan is chosen. That difference of about $19,000 in the two loan balances is the “cost” the producer bears to have a lower monthly mortgage payment. That cost is partially offset by the cash reserve that is built by depositing $123.14 of savings in an account each month earning 2 percent per annum. Ten years out, this cash reserve will have a balance of See NUMBERS, page 2
Professional Dairy Producers I 1-800-947-7379 I www.pdpw.org ™
September 2017 • PDPW • Dairy’s Bottom Line
Nutrition key to healthy calves
1901 Fish Hatchery Road Madison, Wisconsin 53713 GEOF SMITH Toll-Free: 1-888-AGRI-VIEW Madison Phone: 608-250-4162 Madison Fax: 608-250-4155 email@example.com www.agriview.com
PDPW Board of Directors President Marty Hallock Mondovi, Wis. 715-495-2812 firstname.lastname@example.org Vice President Mitch Breunig Sauk City, Wis. 608-643-6818 email@example.com Secretary Brian Forrest Stratford, Wis. 715-650-0267 firstname.lastname@example.org Treasurer Linda White Reedsburg, Wis. 608-393-3985 email@example.com Directors Andy Buttles Lancaster, Wis. 608-723-4712 firstname.lastname@example.org Jay Heeg Colby, Wis. 715-507-0030 email@example.com Steven Orth Cleveland, Wis. 920-905-2575 firstname.lastname@example.org Katy Schmidt Fox Lake, Wis. 920-210-9661 email@example.com Dan Scheider Freeport, Ill. 815-821-4012 firstname.lastname@example.org
PDPW Advisers Mark Binversie Investors Community Bank Manitowoc, Wis. mbinversie@ investorscommunitybank.com Eric Cooley UW-Discovery Farms Sturgeon Bay, Wis. email@example.com Dr. Randy Shaver UW-Madison Dairy Science Madison, Wis. firstname.lastname@example.org Chad Staudinger Dairyland Seed St. Nazianz, Wis. email@example.com
Research on nutrition and feeding of the dairy calf has gone through a re n a i s s a n c e i n recent years. Programs designed to limit-feed calves have been popular for decades to limit the cost spent on Geof Smith milk diets, and to encourage early solid-food intake and weaning. More recently, though, there has been significant interest in increasing volumes of liquid feed offered to calves, offering milk more frequently and increasing milk-replacer nutrient content – specifically protein and/or fat.
Increasing the level of nutrition provided to calves in the first weeks of life results in several benefits: • lower calf mortality, • faster recovery from disease, • younger age at first calving, • improved mammary development and • increased adult milk production. Products and technologies such as new milk replacers, automated calf-feeding systems, milk-balancer products and the acidification of milk have all been introduced largely to facilitate dairy producers who wish to feed for accelerated growth rates during the first five to eight weeks of life. Along with the realization that
we’ve been underfeeding dairy calves for many years, we are seeing more cases of bloat in young dairy calves. This is a completely different syndrome than the bloat typically seen in cows; cow bloat happens when free gas becomes trapped in the rumen – the first of the four stomach compartments – and the cow’s left side becomes distended. Bloat in young calves is instead caused by excessive gas accumulation in the abomasum, the last of the four compartments. Affected calves are typically five to 10 days old, although abomasal bloat may occur as late as 21 days of age. Signs of bloat include refusal to drink milk, distension of the abdomen – bloat – on either the right side or both sides, and often death.
Numbers Continued from page 1
about $16,000. The producer’s net cost of locking in a lower monthly payment would be about $3,000 – $19,000-$16,000. In this example, the producer is able to deposit excess cash into an account yielding interest at a rate of 2 percent per year rather than retiring debt, accruing interest at a rate of 5 percent. So the producer is effectively incurring a 3 percent net cost – 5 percent less 2 percent – on each dollar committed to a cash-reserve account. This net cost can be more or less, depending on the loan interest rate and savings-account yield. Figure 1 shows how the cost of establishing a cash reserve varies depending on the difference between the loan rate and the savings rate. In this case, the loan interest rate holds constant at 5 percent while the savings interest rate ranges from 1 percent to 4 percent. The table clearly shows that as yield on the cash-reserve account rises – narrowing the gap between the loan rate and the savings rate – greater amounts of cash are accumulated. So the cost of maintaining cash reserves declines
Bruce Jones graphics
as yields on cash-reserve accounts rise relative to loan interest rates. Dairy producers need to remember there are trade-offs when it comes to loan-repayment agreements. Accelerated-repayment plans result in lower interest costs through time because less money is outstanding and accruing interest. But committing to a shorter repayment period requires producers to pay considerably higher periodic payments. When cash flows are plentiful that may not be an issue.
But when cash flows are tight, producers would be under less financial stress if loan-payment obligations are less. Producers can get this type of cash-flow flexibility for themselves by working with their lenders to extend loan-repayment periods so loan-payment obligations are more manageable. Bruce Jones is a professor of dairy science at the University of WisconsinMadison. Contact firstname.lastname@example.org for more information.
September 2017 • PDPW • Dairy’s Bottom Line Although the causes of bloat remain uncertain, calf abomasal bloat appears to be caused by factors that slow the emptying of the abomasum. Abomasal emptying in calves is directly related to two main factors: 1) the volume of milk the calf drinks at each feeding and 2) the concentration or “osmolality” of the milk consumed by the calf. Osmolality is a measure of particle concentration in solution. Cow’s milk normally has an osmolality between 280 and 290 mOsm or milliosmole per liter — the same osmotic pressure of blood. But some milk replacers and oral electrolyte products can be concentrated – 600 to 800 mOsm per liter – when mixed, meaning they are much more concentrated than blood. Recent research has shown that calves fed solutions with high osmolality have a much slower abomasal emptying rate as compared to calves fed a solution with a lower osmolality.
Recently the abomasal-bloat syndrome was experimentally reproduced by drenching young Holstein calves with a carbohydrate mixture containing milk replacer, corn starch and glucose mixed in water. The authors of this study suggested that abomasal bloat is caused primarily by the excess fermentation of high-energy gastrointestinal contents. Large amounts of fermentable carbohydrate must be present in the abomasum along with the presence of fermentative enzymes produced by bacteria. That leads to gas production and bloat. The process is exacerbated by anything that slows down the abomasal emptying rate. Other risk factors for abomasal bloat include feeding a large volume of milk in a single daily feeding, not offering water to calves, feeding cold milk or milk replacer, erratic feeding schedules and failure of passive transfer. A producer experiencing problems with bloat in young
calves should evaluate the calf-feeding program for any of those occurrences. To summarize: • Feed a milk or milk replacer with total solids of less than 15 percent – use a Brix refractometer to check. • Ensure consistent mixing of milk or milk replacer. Use a Brix refractometer to check milk total solids at the first calf, middle calf and last calf fed. If the readings vary by more than 1 percent it’s likely that more consistent mixing is needed. • Feed milk that’s the same as body temperature – 100 to 105 degrees Fahrenheit. Cold milk will cause more bloat. • Follow a consistent feeding schedule. Twice-a-day feeding doesn’t need to be exactly 12 hours apart – an 8 a.m. feeding followed by a 4:30 p.m. feeding is fine, but it’s important to be consistent. Inconsistent feeding schedules increase the risk of bloat. Adding a third feeding can minimize bloat – 3 quarts fed
three times a day, for example. • Offer calves free-choice access to clean water. Dairy producers need to think of calves as an investment in the future of the dairy – not an expense. Many new tools have been made available in just the past five to 10 years to make calf feeding at a higher level of nutrition more efficient. However attention must also be given to abomasal bloat in young calves. The most important control factors are to establish a consistent feeding program with milk or milk replacer that has been mixed according to the label directions. Also work closely with a veterinarian to establish treatment programs for those calves, so cases can be managed quickly and effectively if they do occur. Dr. Geof Smith, veterinarian, is professor of ruminant medicine in the College of Veterinary Medicine at North Carolina State University. Contact geoffrey_ email@example.com for more information.
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September 2017 • PDPW • Dairy’s Bottom Line
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September 2017 • PDPW • Dairy’s Bottom Line
October Dairy Dialogue Day: tours offered By popular demand, another round of Dairy Dialogue Day Tours is scheduled for Oct. 26, this time in west-central Wisconsin. Join like-minded dairy producers in a high-impact event that allows attendees the opportunity to engage one-onone with the managers and tea m m e m b e rs o f two high-performing dairies. Heller Farms Inc. of Alma Center is a third-generation dairy farm currently milking 1,500 cows. The farm’s methane digester produces 450 kilowatts of electricity per hour per day. Heller Farm is also home to the Blue Moo, a manmade world-class barefoot-waterski lake that has hosted five national championships and one world championship. Selz-Pralle Dairy of Humbird is home to high-producing cows and show-ring champions. The Pralles use an SCR activity- and
The Heller family is one of two host farms for the upcoming Dairy Dialogue Days. From left in back are Shannon and Derek Klahn, Janell and Blake Heller, Candace Raimer and Shane Heller. In front from left are Cody, Majesta and Jesody Heller; and Elaine and Greg Fatla, with Elaine holding Tucker and Greg holding Cooper.
rumination-tracking system, which has enabled them to reduce incidences of displaced abomasums by 80 percent and drug costs by half. Their cows daily milk 105 pounds of 4 per-
Participants in the upcoming Dairy Dialogue Day will tour Selz-Pralle Dairy, home to show-ring champions. From left are Jessica, Pam and Scott Pralle; Nicole Welke; Royce Demmer and Nicole Pralle.
cent milk. The tour is facilitated by Paul Fricke of the University of Wisconsin-Madison; it’s limited to 50 registrations, with priority for dairy farmers. The bus will
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depart promptly at 9:30 a.m. and will return at 3:30 p.m. from the Best Western, 600 Oasis. Road, Black River Falls. Visit pdpw.org or call 800-9477379 for more information.
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September 2017 • PDPW • Dairy’s Bottom Line
PDPW webinars offered PDPW’s next few World Class Webinars pack a punch, starting with the Sept. 27 edition in which Dr. Geof Smith, veterinarian, of North Carolina State University concludes a twopart webinar series on weather-related calf care. He offers key m e t h o d s to combat weather-related stress in calves as summer heat and humidity transitions to autumn’s damp chill. A new series kicks off Oct. 18 with a two-part webinar on hoof health. Hoof-trimming instructor Karl Burgi will lead participants through an in-depth discussion of hoof-trimming protocols and how to monitor the effectiveness of these systems. The webinar will hone in on implementing an action plan to
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reduce lameness, enhancing the welfare of cows. The second installment on hoof health will be led by Dr. Nigel Cook, veterinarian. The Nov. 22 webinar takes a closer look at top strategies for lameness prevention. Visit www.pdpw.org or call 800-947-7379 for more information or to register. Participants can save when registering for both webinars in a two-part series. Each webinar takes place from noon to 1 p.m. CT; all webinars are recorded for those who register, for listening at a later time.
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September 2017 • PDPW • Dairy’s Bottom Line
Control heifer-rearing costs MATT AKINS
Controlling input costs is key to maintaining profitability with variable milk prices. Producers make a considerable investment in rearing heifers – 20 percent to 25 percent of total farm expenses. The future of the dairy herd offers no return on investment Matt Akins until calves are possibly two years of age. Based on a 2015 update of Wisconsin farm-survey data, heifer-rearing costs typically ranged from $2,000 to $2,200 from birth to calving, with feed costs representing 50 percent to 55 percent of those costs. Fortunately producers may have opportunities to control heifer-rearing costs depending on heifer population needs, reproductive efficiency and feeding strategies. Consider population The number of heifers has an obvious impact on the costs of a dairy. Fewer heifers equals lower costs. When producers improve management of lactating cows – including transition time, nutrition and reproduction – the number of involuntary cow culls should decrease. With reduced cow culling comes less need for heifers. Fewer heifers are needed when: • h e i f e r m a n a g e m e n t improves with decreases in disease and mortality, and • reproduction management improves, ensuring average calving age of 22-24 months. Sometimes extra heifers are kept in case they’re needed, as in the case of disease outbreak or a decision to expand. With accurate data on annual culling rates of adult cows and heifers, first calving age and current herd size, an estimate of
Yields of 6 to 10 tons of dry matter per acre are typical of single-cut conventional forage sorghums. Matt Akins stands next to a field at the University of Wisconsin-Hancock Agricultural Research Station. Eastern gamagrass, a warm-season perennial, is grown at the University of Wisconsin-Marshfield Agricultural Research Station. A palatable grass with an ideal nutrient profile for dairy heifers, gamagrass typically has yields of 4 tons of dry matter per acre with a single harvest in August.
necessary heifer population for the replacement cull cows can be calculated by using the “Heifer Replacement” tool on the University of Wisconsin-Extension Dairy Management website. Visit dairymgt. uwex.edu for the tool. As an example, a herd with 500 adult cows, a cow-cull rate of 30 percent, calf-heifer annual cull rate of 5 percent, and age at first calving of 24 months, 333 heifers would be required to maintain herd size. Herds with 500 cows will statistically have 201 heifer calves each year with a 13-month calving interval, 47 percent heifer calves and 7 percent stillbirths – and would give a population of 402 heifers. That would potentially allow for voluntary culling of 69 heifers, or annual
voluntary culling of 34 heifers. Keep some buffer to avoid a lack of replacement heifers. In that situation a producer may choose to cull 15 to 20 per year to leave a buffer of 10 to 15 heifers on hand. The earlier heifers are culled, the more the savings. Having data on health, growth and genomic information can make culling at an early age a simpler decision. Culling later can allow producers to avoid some risk if heifers are needed, but leads to less cost savings. By culling 20 heifers at three months of age each year in this situation, a producer would save $35,000 a year when costs are $1,750 per heifer from three to 24 months. Reduce days on feed Reducing age at first calving
– and days on feed – will also have a significant effect on lowering cost of rearing, especially if current calving age is more than 24 months of age. Aim to calve between 22 and 24 months to reduce costs, optimize first-lactation milk production and avoid calving difficulties. By reducing calving age from 25 to 23 months, a producer will also reduce days on feed and costs by $165 per heifer. Calving at 22 to 24 months of age requires breeding by 13 months of age and is driven by sufficient growth from birth to breeding. Heifers should be at 55 percent of mature cow weight at breeding; that’s usually 850 to 950 pounds. A successful reproductive program that impregnates heifers by 15 months ensures heifers will
September 2017 • PDPW • Dairy’s Bottom Line calve by 24 months. Closely working with a veterinarian, reproduction consultant or Extension agent can help identify how to impregnate heifers quickly and efficiently. Feeding strategies vary Adjusting the diet by limit-feeding or using lower-cost forages can also help control costs. Feeding less expensive high-fiber forages such as sorghum forages – sorghum-sudangrass or forage sorghum – straw, or warm-season perenn i a l s i n c l u d i n g e a s te r n gamagrass can reduce rearing costs of pregnant heifers. These forages are higher in fiber than corn and alfalfa silage, which helps moderate feed intakes. Heifers typically eat 1 percent of body weight as neutral detergent fiber. Feed intake can be reduced by 10 percent if a diet’s neutral detergent fiber is increased from 45 percent to 50 percent. That also helps control growth rate of pregnant heifers.
Visit dairymgt.uwex.edu for a heifer-replacement tool on the University of Wisconsin-Extension Dairy Management website. The tool can help producers estimate the necessary number of heifers to keep as replacement for culled cows.
In addition, these forages are often less expensive to raise because of lower seed costs and fertilizer needs compared to corn. Straw may be more expensive than other forages. Reducing feed intake by 10 percent would lower costs by about $0.15 to $0.20 a day – or more if a lower-cost forage is used.
Limit-feeding is another option to potentially reduce feed costs. This approach involves feeding a more nutrient-dense diet but only feeding enough to meet specific nutrient amounts. Typically heifers are limit-fed at 80 percent to 90 percent of free-choice amounts. The higher-nutrient diets
require more protein and energy, so a producer would need to use corn silage and lowcost byproducts to reduce costs. Managing limit-feeding can be challenging, though. For this option to work heifer pens must not be overstocked, feed must be pushed up more frequently to avoid reaching and hoof wear, and feed moistures and nutrients must be monitored closely for changes. A nutritionist who understands balancing this type of ration and management style should be called upon to help implement the program. Visit fyi.uwex.edu for an updated feed-cost tool for heifers on the UW-Extension Dairy Heifer. The tool can be helpful for producers to estimate feed costs as costs or amounts change. Matt Akins is a dairy-heifer specialist with the University of WisconsinDepartment of Dairy Science and UW-Extension. Email msakins@wisc. edu for more information.
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September 2017 • PDPW • Dairy’s Bottom Line
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September 2017 • PDPW • Dairy’s Bottom Line
Calf-care workshops offered
Milk Quality workshops scheduled
Successful dairies can trace their viability to effective calf-raising programs. As technologies and new research continues to co m e fo r t h , staying on top o f t h e m os t relevant information is paramount to Theresa profitability. Ollivett De s i g n e d to educate and challenge the most seasoned dairy farmers and calf care managers, a trio of Calf Care Connection® workshops will be held in three Wisconsin locations – Oct. 10 in Chilton, Oct. 11 in Eau Claire and Oct. 12 in Fennimore. Keynote speaker Dr. Theresa Ollivett, assistant professor in the Department of Medical Sciences at the University of Wisconsin-
Producing high-quality milk is a priority for today’s dairy farmers; it can make a big difference in the mailbox milk price. PDPW is hosting two Milk Quality workshops – Nov. 1 in La Crosse, Wisconsin, and Nov. 2 in Fond du Lac, Wisconsin. D r. P a m e l a Ruegg, University of Wisconsin-Extension dairy-science professor and Pamela specialist will Ruegg lead the workshop, sharing the latest on bedding management, on selective dry-cow and fresh-cow therapies, and on choosing between one-quarter or all-quarter treatments. Ruegg will also guide participants through the decision process of treatments as well as discussions of case
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Madison, will with other industry experts present the latest in calf care and management. With her primary expertise in calf respiratory health and experience as a large-animal veterinarian, Ollivett will arm participants with key trouble-shooting, illness-prevention and management tools that can mean the difference between resilient calves and sick calves. All who attend a workshop – calf-care managers, calf feeders, team members and others who work alongside young stock and newborn calves – will return home with new information, tools and a renewed enthusiasm to manage and care for the calves that represent the future of their herds. Visit www.pdpw.org or call 800-947-7379 for more information.
studies. Other featured experts include Dr. David Rhoda, retired veterinarian from David Rhoda Evansville, Wisconsin, whose l a rge - a n i m a l veterinary practice emphasized communication between farm m e m b e r s regarding mediKatie Mrdutt cation use in the dairy herd. Together with Food Armor outreach specialist Katie Mrdutt, they will advise participants in strategies of recordkeeping to enhance efficiencies and more effectively target and treat specific cows. Visit www.pdpw.org or call 800-947-7379 to register and for more information.
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September 2017 • PDPW • Dairy’s Bottom Line
Work on long-term-care planning GEORGE TWOHIG
Dear George: My parents are phasing out of our family farm while my husband and I are looking to eventually comp l e te ly ta ke ove r ow n e rship. My parents are both healthy now, but as they grow older we want to ensure George their longTwohig term-care needs will be met. With so many options available it’s difficult to know what’s best. Can you help us sort through the options? – Wanting to be prepared Dear Wanting: Most parents are in their 50s and 60s and are in good health when they begin farm-succession planning. At that age they anticipate remaining active to mentor and partner with the next generation. They focus initial planning on sharing work and management, lifetime transfers of earned equity, and an estate plan that assures the farm will transfer to the successors in the event of their deaths. Planning to protect farm assets held by parents – or grandparents in some instances – from the r i s k o f l o n g - te r m - c a re expenses is often postponed. Farmers live independent lives and value maintaining that independence. Home and farm settings provide the opportunity to remain part of the farm business while offering convenient comfortable surroundings in which to maintain privacy and dignity. B u t a s a p e rso n a ge s o r
The importance of planning ahead for long-term care is critical, especially for farm owners and partners near to phasing out of business. Seek professional advice before a long-term-care need arises, in order to protect farm assets.
experiences a health problem, it’s increasingly likely he or she will need assistance to stay at home – or will need to move to assisted living or a nursing home for long-term care. Most farmers have heard of situations in which longterm-care expenses severely impacted farm finances and plans of farm transfer. Nursing-home care or professional in-home care can cost more than $9,000 a month. Unfortunately sometimes placement in assisted living or a nursing
home is medically required, in spite of a family’s desire to care for a loved one at home. It’s important to make a plan in advance to avoid misconceptions about who will pay the costs of long-term care – if needed – and how to protect assets from those costs. There are four basic ways to pay for long-term care. Me d i ca re a n d h ea l t h insurance – the initial costs of health care are typically covered by a person’s health insurance, or by Medicare and a supplement policy, for those
65 and older. But health insurance does not cover longterm-care expenses and Medicare will only cover up to 100 days of a nursing-home stay. Self-pay – another way to p ay fo r l o n g - te r m - c a re expenses is with personal income and funds. Because most farmers have limited outside investments, the costs must then be paid from the farm’s limited income. Long-term-care insurance – the third way is to buy long-term-care insurance or nursing-home insurance. In substance, long-term-care i n s u ra n c e i s a f o r m o f self-payment because a premium is paid for the protection. Benefits are received only in the event of required longterm care. Premiums can be made more affordable by altering factors such as the timing and scope of coverage. Deciding whether to buy it – as with most insurance – involves somewhat of an educated guess. Does the family support providing at-home care? Are family members confident they could handle the cost of long-term care if needed? What is the cost? Long-term planning should consider the role long-termcare insurance might provide in each circumstance. Medicaid – while the Medicaid program has rather comprehensive coverage for longterm-care expenses, it has many complex financial-qualification rules. If single, the recipient’s permitted assets are limited. If married, the recipient and spouse are allowed to own only their personal effects, the homestead, one vehicle, burial accounts
September 2017 • PDPW • Dairy’s Bottom Line and a limited amount of other assets. Additionally real estate and personal property may be exempt if used in a trade or business such as farming. However the Medicaid Estate Recovery Program seeks to recover the amount paid by Medicaid. The recovery program allows the government to, after death, place a lien on real estate and certain other assets owned by the recipient. How can a person reduce assets to qualify for Medicaid? It may be advisable to transfer ownership of farm assets to the next generation before a long-term-care crisis occurs or, at minimum, when longterm care appears likely. Medicaid deems gifts of assets to others or to an irrevocable trust as an asset divestment, subject to a five-year lookback for transfers made under the Medicaid rules. The transfer will not affect Medicaid
benefits if the transfer is made at least five years before applying for Medicaid. Outright gifts – some farmers prefer to accelerate their plans for transfers to the successors. In many instances the parents trust that the successors are fully capable of managing the farm and stewarding the farm assets. Often parents will gift assets such as their home or farm while retaining a right of occupancy or a right to the rent income. But the Medicaid Estate Recovery Program allows for recovery for any life estate established after Oct. 1, 2014. Irrevocable trusts – the parents may elect to establish an irrevocable trust to hold the farm assets. The parents have no power to amend or revoke the trust. Most often the trust will be drafted so that the income from the trust is paid to the parents during their
lifetimes for their living expenses; the principal cannot be applied for their benefit. If a parent moves to a nursing home, the income will need to be paid to the nursing home. However the principal – such as farm real estate – will be protected; the principal is not considered an asset for Medicaid qualification purposes. When the parents die, the principal is then paid to the designated beneficiaries. The trust will often include a “special testamentary power of appointment” allowing the parents to change beneficiaries within the family group. That allows beneficiaries to receive a stepped-up basis to fair market value of the assets upon the parent’s death. However revocable-trust or living-trust assets, which can be amended or revoked by the individuals who created the trust, will be considered when
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determining Medicaid eligibility. Although effective in avoiding probate, revocable trusts are not effective in Medicaid planning. Although heavily promoted, long-term-care insurance and irrevocable trusts are not always the best solutions. They aren’t magic bullets. But when appropriate and specific to the needs of the family and farm, long-term-care insurance and irrevocable trusts are important long-term planning tools. Careful planning can achieve significant results in minimizing the negative financial impact of a longterm-care event. George Twohig is a partner and attorney at Twohig, Rietbrock, Schneider & Halbach S.C. in Chilton, Wisconsin; the firm focuses on agriculture and agri-business. Contact email@example.com for more information.
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September 2017 • PDPW • Dairy’s Bottom Line
Define success to achieve it HANK WAGNER
I love PDPW! The organization has such a deep history of amazing people with a potentially life-changing mission: “To s h a re i d ea s, solutions, resources, and experiences that help dairy producers sucHank Wagner c e e d .” T h a t purpose has an exponential effect because growing successful producers translates into success not just for individuals but also for families, family businesses and for all associated with our industry. I am honored and proud to be connected to an organization that exists to help bring success to others. To be successful we first need to know what success means to us. No organization or individual can help another find success if its meaning isn’t first clarified – a n d i t ’s d i f fe re n t fo r eve ryb o dy. So m e p e o p l e believe success is accidental, involves luck or is only for the few who stumble upon it. Truly, being in the right place at the right time may help, but real success has little to do with luck – and everything to do with focus, determination, and a hunger to learn and apply that learning. Many organizations and businesses spend lots of time and money vision-casting, creating mission statements, planning and setting goals to define success for themselves; then they can m a k e a p l a n to a c h i e ve
Hank and Shawn Wagner and Tyler Raatz understand that the work they do outside is just as important as the kitchen-table discussions and vision-casting they do to help ensure success in business.
success. It’s an important process that can deliver big rewards and I believe the process is one of the most important responsibilities of leaders. In the agricultural industry many of us own our own b u s i n e sse s. W h e t h e r we partner with others, have key employees involved in determining our business direction or manage primarily on our own, it’s those w h o h a ve i n te n t i o n a l l y determined what success means to their businesses who are actually positioned to be successful. If business owners think beyond business visions and allow – or even promote – the success of the families and individuals who comprise their businesses, it’s
p oss i b l e to h ave m u c h broader success. Aren’t people more important than the business entity? Families and individuals serve the business, not the other way around. These people-centric concepts can cause all kinds o f d i sc u ss i o n fo r fa m i ly
businesses. If business partners, family members and the others involved in a business team are not in agreement, there’s a weak link in the chain to success. Often conflict arises in the businesses that haven’t invested appropriate time or energy to clearly define success. If the goals of individuals and family members aren’t identified and acknowledged, that team faces a challenge in working toward any goal. All teams are comprised of individuals and every one of them is different. In fact, teams with the most diversity can have the biggest impact because of their ability to generate more ideas. Understanding and clearly defining what success means to us goes a long way toward bringing our dream or vision into reality. This truth and the rewards that accompany it do not only apply to businesses but also to the individuals, families and teams who invest in it. Hank Wagner is a dairy producer and a John Maxwell Team teacher, mentor, speaker and coach. Contact firstname.lastname@example.org for more information.
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Published on Sep 20, 2017