AM12 Agriculture Management, Economics, & Sales Other Risk Management Tools Unit: Agribusiness Management Lesson Title: Other Risk Management Tools Standards ABS.07.04.01.a. Determine the meaning and importance of risk and uncertainty with AFNR enterprises. ABS.07.04.01.c. Prepare a comprehensive risk management and contingency plan for an AFNR business. CCSS.ELA-Literacy.W.11-12.3 Write narratives to develop real or imagined experiences or events using effective technique, well-chosen details, and well-structured event sequences. CCSS.ELA-Literacy.W.11-12.1 Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence. CCSS.ELA-Literacy.SL.11-12.1 Initiate and participate effectively in a range of collaborative discussions (one-on- one, in groups, and teacher-led) with diverse partners on grades 11–12 topics, texts, and issues, building on others’ ideas and expressing their own clearly and persuasively. Student Learning Objectives Slide 2 in AM12 Other Risk Management Tools Lesson Objective After completing the lesson on other risk management tools,
ABS.07.04.01.a. Determine the meaning and importance of risk and uncertainty with AFNR enterprises.ABS.07.04.01.c. Prepare a comprehensive risk management and contingency plan for an AFNR business.
CCSS.ELA-Literacy.W.11-12.3 Write narratives to develop real or imagined experiences or events using effective technique, well-chosen details, and well-structured event sequences.CCSS.ELA-Literacy.W.11-12.1 Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence.CCSS.ELA-Literacy.SL.11-12.1 Initiate and participate effectively in a range of collaborative discussions (one-on-one, in groups, and teacher-led) with diverse partners on grades 11–12 topics, texts, and issues, building on others’ ideas and expressing their own clearly and persuasively.
Student Learning Objectives
Slide 2 in AM12 Other Risk Management ToolsLesson ObjectiveAfter completing the lesson on other risk management tools, students will demonstrate their ability to apply the concept in real-world situations by obtaining a minimum score of 80% on an Estate Planning Fairytale.
Enabling ObjectivesAs a result of this lesson, the student will…
1. Draft a proposal for an estate plan.2. Rationalize the use of wills in estate planning.
Page 2
3. Justify stock markets, rental and leasing agreements, and good financial planning as a tool for risk management.
Time: Approximately 120 minutes
List of ResourcesBrownfield Ag News. (n.d.). Brownfield Ag New For America. Retrieved from
http://brownfieldagnews.com/.
Co-Ownership of Real Property. Retrieved from: http://www.marealtor.com/content/ownership_property.htm.
Hambelton, S. (n.d.) Estate Planning…What Do We Need To Know Now? Retrieved from http://extension.missouri.edu/ozark/documents/Estate%20Planning%20Forage%20Beef%20Conf%20Gains%202013.pdf.
Jobes R., Steward J., Casey J., Bangert L. (2011). Farm Business Management StudentGuide. Moline, IL: John Deere Publishing.
List of Tools, Equipment, and SuppliesAM12 PowerPoint PresentationAM12 Activity Sheet and Evaluation PacketNote cards or small sheets of paper for review activityRecording device for public service announcements
Agribusiness Management AM12 Other Risk Management Tools
Page 3
Suggested fairytales for evaluation: Cinderella, Hansel and Gretel, Jack and the Beanstalk, and Peter Pan
Key TermsSlide 3 in AM12 Other Risk Management Tools
The following terms are presented in this lesson (shown in bold italics):Estate planningEstate taxGiftTenancy-in-commonJoint tenancyTenancy by the entiretyWill Beneficiary
Agribusiness Management AM12 Other Risk Management Tools
Page 4
Interest Approach: Use an interest approach that will prepare the students for the lesson. Teachers often develop approaches for their unique class and student situations. A possible approach is included here.
Slide 4-6 in AM12 Other Risk Management ToolsWhat’s The Risk? Show students cartoons on PowerPoint slides. As students observe the pictures, have them consider these questions: How can this pertain to risk management? What is the take-away message? Why is this important?
Facilitate a class discussion on risk management and how it relates to estate planning, retirement, real estate, and the stock market.
Agribusiness Management AM12 Other Risk Management Tools
Page 5
Summary of Content and Teaching Strategies
Objective 1: Draft a proposal for an estate plan.
Teaching Strategies Related Content1. Review discussion from interest approach,
and have students define estate planning.
Slide 7 in AM12 Other Risk Management Tools
2. How does a property owner’s risk increase by not having an estate plan in place??
Slide 8 in AM12 Other Risk Management Tools
3. Let’s consider ourselves property owners. What should we consider when beginning our estate planning?
Slide 9 in AM12 Other Risk Management Tools
4. Two things are sure in life – what are they? Solicit “death and taxes” from students. And, with the transfer of estate, we must be aware of estate taxes.
Slide 10 in AM12 Other Risk Management Tools
5. Brownfield Ag News at http://brownfieldagnews.com/ has good up-to-date articles if searching under estate tax
Estate Planning Plan for financial security during
retirement Consideration for heirs Future continuation of a business Considers the laws of wills, taxes,
insurance, trusts, and property
No Estate Plan Could Mean… Hard feelings among heirs Having no control over future land
owners Unfair or unequal treatment of
children Selling and/or splitting the farm
into smaller units – often decreasing the overall value
Considerations in Estate Planning Reasons for establishing the plan
o Keep the farm in the family; Treat all children equally; Help children start farming; Reduce estate, income, and gift taxes
Estate Taxes Tax on right of property owner to
transfer property at death Unified Transfer Tax - Federal tax
that taxes transfer of property by gift or death
States have additional estate taxes
Agribusiness Management AM12 Other Risk Management Tools
for students to further examine. The estate tax laws continually change. Be sure to find up-to-date and accurate information pertaining to the federal and state estate tax laws.
6. Poll the students to see who plans to work up until they die. Then, ask students who do not know how they plan to survive after they get done working. Answer: retirement plan.
Slide 11 in AM12 Other Risk Management Tools
7. Assign small groups of students or pairs and have them create a proposal for an estate plan on AM12.1. Have them address the steps they would take as the property owner, how they would prepare for retirement, how they would set surviving family up to be adequately cared for, etc.
8. Upon initial completion of AM12.1, view the following video: http://www.youtube.com/watch?v=ZgJn4mAKy8Y. Students should complete AM12.6 during the video.
9. Students will add to or adjust their proposed state plan (AM12.1), being sure to include the things learned and topics covered in the above video.
10. Facilitate a class discussion on the changes
Retirement Provisions in Estate PlanChoose several sources for retirement income
IRA, HR-10, SEP, QRP Annuity Trusts Life Insurance Social Security Rental or Lease of Farm Property Sale of Farm U.S. Savings Bond Stocks and Bonds U.S. Treasury Bills Nonfarm Investments CD’s
Agribusiness Management AM12 Other Risk Management Tools
made to the proposed estate plans following the video.
11. Introduce next objective - Let’s take a closer look at some of these estate planning tools.
Objective 2: Rationalize the use of wills in estate planning. Teaching Strategies Related Content
1. As property owners, how could we legally transfer our property to someone else?
Slide 12 in AM12 Other Risk Management Tools
2. Could we “gift” our property to someone?
Slide 13-14 in AM12 Other Risk Management Tools
3. If we were going to create a will, what are some considerations we should make?
Transferring Legal Ownership of Property Will Contract
Deeds prove the ownership of the land, but a legal contract must be created to formally sell the property.
Gifts A properly signed, acknowledged, and
delivered deed can grant land to be given away
Personal property can be given away if the intended recipient will become the present owner
Co-ownership through: Tenancy-In-Common – Each tenant has separate percentage of interest, Do not have right of survivorship so ownership is passed through a will to someone who will become a tenant with other co-owners; Joint Tenancy – Tenants hold single, unified interest in property, Right of survivorship, so ownership passes to joint tenant and not to deceased owner’s estate, 4 unities must exists – Unity of Time, Unity of Possession, Unity of Title, Unity of Interest ; Tenancy by the Entirety – Exclusively for husband and wife, Right of survivorship, 4 unities plus Unity of Marriage is required; Partnership; Cooperation
Wills Legal statement of person’s wishes
Agribusiness Management AM12 Other Risk Management Tools
Page 8
Slide 15 in AM12 Other Risk Management Tools
4. As a property owner, why would we want to have a will?
Slide 16 in AM12 Other Risk Management Tools
5. There are some concerns about dying without a will that some property owners must face.
Slide 17 in AM12 Other Risk Management Tools
6. Trusts are another tool in estate planning.
Slide 18 in AM12 Other Risk Management Tools
7. There are a variety of types of trusts, but a living, revocable trust is often used in estate planning.
Slide 19 in AM12 Other Risk Management
pertaining to disposal of property after death
Formally executed wills drawn by an attorney are recommended for estate planning
Will must be proven official and admitted to the courts – Immediate wishes should be left out of wills and given to entrusted relative or friend to execute
Wills have no effect until maker dies Wills only control the property the
maker of the will individually owned Wills are not immediately effective
upon death of maker
Why have a will? Allow for distribution of assets as
owner wishes, not by laws of descent Reduced cost of settling estate Owner can name own executor of will Owner can name a guardian for minor
children Trust funds can be established –
Ensures security of beneficiaries; Person or institution administers money or property as instructed in the will
Avoid family conflict
Dying Without A Will State laws govern estates of the
deceased – Laws of Descent and Distribution
Court appointed administrator of estate Court appointed guardian for minor
children Increased cost of settling estate
Trusts Division of property, assets, businesses,
etc. among a variety of owners A way to avoid probate and estate taxes
Living, Revocable Trust Most flexible estate planning tool Maintains complete control until death Capital and liquid assets are included
Agribusiness Management AM12 Other Risk Management Tools
Page 9
Tools
8. Another tool in estate planning is an LLC.
Slide 20 in AM12 Other Risk Management Tools
9. Facilitate a discussion about what students believe may be the benefits of an LLC.
Slide 21 in AM12 Other Risk Management Tools
10. Let’s take a look some specifics of an LLC.
Slide 22 in AM12 Other Risk Management Tools
11. Review AM12.1 and add how you would suggest the use of a will, gift,
Somewhat complicated to set up
LLC Limited Liability Company Legal business organization Introduced in Wyoming in 1977 Missouri adopted this business
organization in 1993
Benefits of LLCs Flexibility – Most flexible business
organization form; Treated as sole proprietorship for federal income tax; Combines best features of all business organizations – liability protection like a corporation; flexibility of partnership or sole proprietorship
Liability Protection – Member or manager of LLC not liable for the debt, obligation or liability of LLC
LLC Specifics Management
o Can be managed by members or by a specified manager; Manager – Member or members have no right to participate in management; Members like investors in a limited partnership or shareholders in a corporation
o Must have at least one organizer – Signs articles of organization
Taxes and Legal Issueso For federal taxes, business must
specify if it will be classified a sole proprietorship, partnership, or corporation
o Missouri income tax follows IRS classification
o For legal purposes, company remains an LLC under Missouri law
Agribusiness Management AM12 Other Risk Management Tools
Page 10
trust and/or limited liability company. Define a beneficiary, the co-ownership of a gift, etc.
12. Take home project – Have students interview their parents and grandparents about estate planning. As a class, devise interview questions for each generation. Set deadline for interview completion. Upon completion, use one class period (or a partial class period – depending upon class size and depth of discussion) to facilitate a discussion on their findings.
Objective 3: Justify stock markets, rental and leasing agreements, and good financial planning as a tool for risk management.
Teaching Strategies Related Content1. In previous lessons, we discussed the
stock market (AM9), rental and leasing agreements (AM4), and good financial planning (AP4). If these lessons were not covered, it is suggested to do some study before completing this objective as knowledge of the above items will be needed in order for students to justify them as a risk management tool.
2. Complete AM12.2 in small groups or pairs.
Review/SummarySlide 23 in AM12 Other Risk Management Tools
Risk management is imperative to a successful agribusiness enterprise. Using tools such as estate planning, the stock market, rental and leasing agreements, and good financial planning will help a business owner find success in managing risk.
Review: Review each group’s public service announcement and identify five key points about their assigned risk management tool on AM12.3.
Agribusiness Management AM12 Other Risk Management Tools
Page 11
Slide 24 in AM12 Other Risk Management ToolsExit cards: Students will answer the following questions on a note card or small slip of paper and hand to the teacher as they exit:
What did you learn today about risk management and the stock market, estate planning, rentals/leasing, and record keeping?
What questions do you still have about risk management and the stock market, estate planning, rentals/leasing, and record keeping?
Application
Extended ActivitiesInvite a local lawyer to class to discuss the importance of estate planning. Have students develop 5-8 questions each to be answered during the discussion. At the conclusion of the class, have students create a three-paragraph advice column using key points learned from the lawyer.
Hold an estate planning seminar for local agribusiness owners and farmers. Invite expert advisors in estate planning to speak with the group about how to be prepared. Additional seminars could be held for individual meetings following a large group session. To expand the seminar, invite area and/or district FFA chapters to bring their local business owners and farmers to the event.
EvaluationEstate Planning Fairytale AM12.4
Alternate - Paper-pencil Quiz Evaluation AM12.5
Answers to EvaluationEvaluation AM12.4Answers will vary. Use scoring guide on AM12.4 to assess student work.
Alternate Evaluation AM12.51. A2. C3. A4. C5. D6. B7. A
Agribusiness Management AM12 Other Risk Management Tools
Page 12
Agribusiness Management AM12 Other Risk Management Tools
