In an opinion issued October 10, 2014, the 8th Circuit Court of Appeals in the case of Morehouse v. Comr. overturned the decision of the U.S. Tax Court on the issue of whether Conservation Reserve Program (CRP) payments to non-farmers are subject to self-employment tax. The Tax Court had determined that Mr. Morehouse was “‘engaged in the business of participating in the CRP․ with the primary intent of making a profit’ and that there was a sufficient nexus between this business and the CRP payments, thus categorizing the payments as net earnings from self-employment.” The Tax Court rejected the argument that were rentals from real estate and therefore not included in net earnings from self-employment.

I spent much of last week at the LDS Philanthropies National Planned Giving Council’s Annual Seminar. It is a great conference where Attorneys, Accountants, Wealth Advisors, and Trust Officers from around the country gather to discuss planned giving and the best practices when advising families in regards to wealth transfer.

I am working on putting the finishing touches on materials for a conference I am speaking at in December. Among the topics I will be speaking on is choosing the right entity for your farm or ranch business. There are many considerations in making this choice and often the business objectives can be at odds with the estate planning objectives. It is important to consider and weigh both when making these decisions.

Here in Cache County, Utah, school is officially back in session. Around the country many have already started or will be starting back shortly. I recently read an article in Forbes Magazine entitled “Two Document Every 18 Year Old Should Sign.” The article is a great reminder that if you have a child who has now turned 18 there are a couple of additional items you should add to your back to school checklist.

One of our cars was running a little rough so I took it into our local mechanic last week for a tune-up. Turns out in addition to the tune-up I was a little behind on some of the maintenance. A new water pump and timing belt later and the car is ready to run. I could have postponed the work, but eventually it had to be done and if I had not taken care of it quick enough, there may have been some real damage to the car.

If you follow this Blog, you know I am a big golf fan. This weekend, the Open Championship, one of golf’s four “major” championships is being played at England’s Royal Liverpool. As I have watched some of the world’s great golfers stepping up to the tee, it is clear they each have a routine, a process or checklist they follow on each swing and throughout the tournament. As they review mentally the steps for success, they are more likely to be successful in their pursuits. The same can be said of succession planning. There will be hazards and bunkers. There will be errant shots and injuries. You may even go out of bounds and have to take a penalty stroke. But if you can keep coming back to your process you will ultimately find your way to success.

While there may be many reasons for forming a business entity of one type or another, one of the most important reasons is the limited liability of individual owners for the debts and obligations of the company. Unlimited personal liability for the debts and obligations of the business exist for general partners in a partnership and sole proprietors. Owners of limited liability entities, such as corporations or limited liability companies, on the other hand, have personal liability for the debts and obligations of the business only to the extent of their invested capital and to the extent that they may have assumed personal responsibility for the same.

Next week in Los Angeles County Probate Court, a trial will occur to determine if Donald Sterling, the now infamous owner of the Los Angeles Clippers, was properly removed as a trustee of the Sterling Family Trust. Sterling’s removal paved the way for the Clippers to be sold to former Microsoft CEO Steve Balmer for $2 billion. Sterling was removed after two doctors determined that he was mentally incapacitated and, as a result, no longer able to manage his own legal and business affairs, nor that of the Trust. The Trust provided for a removal in such instances. Sterling has now sued to be re-instated as the Trustee.

Last week the United States Supreme Court issued the long awaited decision in the case of Clark v. Rameker. The decision resolved a conflict among the lower courts as to whether or not an inherited retirement account was exempt from creditor claims in Bankruptcy. Generally, your own retirement account (Traditional IRA, Roth IRA, 401K, 403B and the like) is exempt from the claims of creditors, meaning it cannot be seized by judgment creditors or lost in a bankruptcy. However, it has been unclear whether this same protection is available to retirement accounts you inherit from another.

This week’s post is a continuation of the discussion from last week of succession in family businesses, particularly farm family businesses. There are two areas of transition that need to be considered when planning for succession. Transition of leadership and transition of ownership. The two can and probably ought to be mutually exclusive. Transition of leadership can and often should take place prior to transition of ownership. The time to transition leadership to the child is not when the child is in his or her 60s or 70s and the parents are in their 80s or 90s. Rather, transition of leadership can and should take place much earlier when the child is in their prime years of vibrancy and innovation. Ownership on the other hand may transition later and may transition to more individuals.

I had the opportunity to participate in the planning of a conference that was held last week in Minneapolis, Minnesota on Farm Business and Estate Planning. It was a great event and I learned a lot from the various presenters. One of the presenters was my friend John Baker from Iowa State University. John is one of the editors of the book Keeping It In the Family: International Perspectives on Succession and Retirement on Family Farms. John has a special expertise in family business dynamics. One of the areas John discussed was what he referred to as conversation confusion. Our conversations about business succession can become confused by a variety of factors: timing, location, role, vocabulary or conflict. For example, timing, when do you hold your meeting as to discuss succession? Do you hold it over Thanksgiving because it is convenient to get all of the children there? If you do, you are operating in “family system” while attempting to discuss issues that are in the “business system.” People will have difficulty shifting gears and it will create confusion. Where are you holding the meeting? Is it around the family dinner table? Is everyone sitting in the same chairs they have sat in their entire life? Are people focused on the task at hand or are some fulfilling “family” roles, such as attending to food and drinks?

Yesterday was Mother’s Day and like many of you I celebrated with both my own Mother and my Wife. I took the opportunity to tell my children stories of their Mother, my Mother, and my Grandmothers. Telling these stories reinforced for me the power that exists when we share stories that convey our values.