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Life insurance can serve a number of purposes for the agricultural family. Besides providing for the continuation of income in the event of a breadwinner’s death, life insurance can accomplish four main goals.

First, it may provide cash for the payment of debts, funeral expenses, probate fees, medical expenses, estate taxes, etc. Having cash to pay these expenses may prevent heirs from being forced to sell assets in order to pay these costs.

Life insurance also provides cash to children who are not inheriting a family farm/ranch as a means of equalizing inheritance with a child or children who are inheriting a family farm/ranch.

It can provide cash for funding a buy-sell agreement between business partners/shareholders.  Life insurance proceeds are used to buy-out the deceased partner’s share of a business.

Finally, life insurance also provides cash for wealth replacement for heirs when a Charitable Remainder Trust is used to avoid tax on the sale of farm/ranch property.

Ownership of life insurance

Many agricultural families own life insurance, so their kids will have money to pay estate taxes and other costs associated with their death. Having cash to pay these expenses may prevent the kids from being forced to sell part of the ranch to pay these expenses. 

What many people don’t realize, however, is that if they own their life insurance policy, a significant amount of the proceeds may end up going to the IRS.  While it is true that life insurance proceeds are usually received income tax-free, they are not estate tax-free. 

There are ownership dilemmas associated with life insurance, which impact whether or not the life insurance proceeds are included in an estate.  The IRS states that if a person has any “incidents of ownership”in a life insurance policy, the proceeds will be included in their estate at death. Incidents of ownership can include the right to borrow on a policy’s cash value, to change the policy’s beneficiary, to change a settlement option and the right to change the dividend selection. 

There are two primary means of keeping life insured’s proceeds from being included in your estate.  

The first is to have an adult child or children own the policy. The second, and preferred, method is to have the policy owned in an Irrevocable Life Insurance Trust.

Irrevocable Life Insurance Trust (ILIT)

An ILIT is a type of trust designed to own life insurance.

There are three good reasons to utilize an ILIT. The first is for estate tax considerations, the second is for concern of leaving a large sum of money unsupervised to a minor or an irresponsible adult and, lastly, for asset protection concerns.

If an ILIT is structured properly, the death benefits paid to the trust will be free from inclusion in the gross estate of the insured. 

If the insured has beneficiaries that are minors or adults that aren’t good with money, it might be wise to set up an ILIT with the trust as beneficiary. This appoints a trustee to act as a supervisor for the trust and distribute the assets per the terms of the trust documents as per the grantor’s wishes.

An ILIT can also provide asset protection.  ILITs are not considered to be owned by the beneficiaries.  This makes it difficult for courts or creditors to access the assets in the ILIT. 

Life insurance trust assets are excluded from estate tax only when the following conditions are met:

The ILIT must own the policy.

The ILIT must be the beneficiary of the policy. 

The insured may not retain any incidents of ownership in the policy. 

The ILIT must be irrevocable. 

The ILIT must be established during the insured’s lifetime. 

The trustee is not allowed to use ILIT assets for the benefit of the estate.

Children as owners 

Another method that may enable life insurance proceeds to be excluded from your estate is to have your adult children own the policies.  

Under this arrangement, you could gift an amount each year to your child or children to cover the annual premium, and they would pay the premium themselves.  

There are some potential problems with this arrangement.

First, your child or children control the policy and could make changes that aren’t consistent with your desires.  

Also, if one of your children is involved in a divorce, their spouse could claim that the policy is community property.  

If one of your children precedes you in death, your child’s disposition of the interest in the policy to his or her spouse, for example, might not be the same as what you would have wanted. For example, in this event you may have provided that your grandchildren receive the benefit.

Effective for ag

Life insurance can be an effective tool for an agricultural family.  There are many types of life insurance polices and many ways of structuring policies for achieving one’s goals.  

There are also serious tax ramifications associated with the ownership of life insurance.  It is important to work with an experienced independent agent and to involve the assistance of an estate planning attorney.  

For more information, request Wealth Guide titled Life Insurance: An Effective Estate Planning Tool for the Agricultural Family.

Chris Nolt is the owner of Solid Rock Wealth Management and Solid Rock Realty Advisors, LLC, sister companies dedicated to working with families selling a farm or ranch and transitioning into retirement.  For more information, call 406-582-1264 or visit and

Samuel Johnson said, “Agriculture not only gives riches to a nation, but the only riches she can call her own.”

As of yet, we still have no Farm Bill. It at least went into conference, where they will hash out all the differences, and hopefully they can come up with a bill that everyone can live with.

The Supplement Nutrition Assistance Program (SNAP), which has always been a part of the Farm Bill, is probably the biggest hold up. The Senate version of the Farm Bill cuts SNAP by a far smaller amount than the House version.

Our Congressional delegation continues to be a strong voice for Wyoming agriculture. They understand the important role agriculture plays in Wyoming and our nation.

Crop insurance is still the number one priority, in cooperation with the National Association of Wheat Growers (NAWG). We all know how important crop insurance is to each of our own farming operations. It provides a safety net so necessary to an industry that is affected by so many unknowns. 

There is still a lot of pressure to tie crop insurance to conservation compliance. NAWG continues to provide a united front in opposition to linking compliance with crop insurance. 

Our Wyoming delegation continues to stand in opposition to this as well.

The WWG board has been active this year, as well. Board members include myself, Vice President Tyler Anderson of Pine Bluffs, Recording Secretary Russell Beavers of Burns, Past President John Watson of Wheatland and Directors Theron Anderson of Albin, Derek Jackson of Torrington, Stephen Johnson of LaGrange and Casey Madsen of Pine Bluffs. 

We have travelled to Washington, D.C. to meet with the Wyoming delegation, attended the Commodity Classic to continue building the bridges and developing relationships with other commodity organizations to create a more unified presence for agriculture.

The Board also attended the NAWG fall meeting jointly with U.S. Wheat, updated resolutions and set new policy in Portland, Ore. These meetings are necessary to keep Wyoming’s voice strong. 

Additionally, the Board participated in numerous conference calls relating to the Farm Bill and other industry issues and developed annual meeting agenda and programs. 

Wheat is an important commodity for the U.S.

Wheat is the primary grain used in U.S. grain products. Approximately three-quarters of all U.S. grain products are made from wheat flour, according to the USDA. Wheat is grown in 42 states in the United States.

More food are made with wheat than any other cereal grain. USDA also says that U.S. farmers grow nearly 2.4 billion bushels of wheat on 63 million acres of land.

In the United States, one acre of wheat yields an average of 37.1 bushels of wheat. One bushel of wheat contains approximately 1 million individual kernels.

One bushel of wheat weight approximately 60 pounds and yields about 42 pounds of white flour or 60 pounds of whole wheat flour. That same bushel of wheat yields 42 commercial loaves of white bread, each weighing about 1.5 pounds. Each loaf requires about 16 ounces of flour to make. A bushel of wheat also makes about 90 one-pound loaves of whole wheat bread.

In the U.S. agriculture industry in general, 2.2 million farms dot America’s rural landscape. About 97 percent of U.S. farms are operated by families – whether that be indivdiduals, family partnerships or family corporations.

Farm and ranch families comprise just two percent of the U.S. population, but more than 21 million Americans, or 15 percent of the U.S. workforce, produce, process and sell the nation’s food and fiber.

In producing 262 percent more food with two percent fewer inputs, farmers and ranchers receive only 16 cents out of every dollar spent on food at home and away form home. The rest goes for costs beyond the farm gate.

Americans enjoy a food supply that is abundant and affordable overall and among the world’s safest, thanks in large part to the efficiency and productivity of America’s farm and ranch families.

Visit the Wyoming Wheat Growers Association online at

I am glad to be back visiting in Washington, D.C. It is an honor for me to testify on behalf of National Cattlemen’s Beef Association(NCBA) before EPA regarding the proposed rule to reduce the 2014 renewable volume obligations under the Renewable Fuel Standard (RFS).

The Renewable Fuels Standard has been a topic of interest in the beef industry since Congress passed the legislation in 2005 and then greatly expanded the mandate in 2007. Our industry supports renewable energy including ethanol, but the government policies passed by Congress and enforced by the EPA have created significant challenges for the livestock sector that also depends on corn to feed our animals.

NCBA strongly supports EPA’s proposed rule to reduce the 2014 renewable volume obligations for conventional ethanol by 1.39 billion gallons. The proposal is focused on the energy side of this debate rather than the feed side – but these actions will have a direct impact on our industry that also utilizes corn. During the 2002-03 marketing year, USDA estimated that corn use for ethanol production accounted for 10 percent of the total U.S. corn usage. Today, because of the government policies in place, roughly 42 percent of the corn crop is utilized by one user of corn – the ethanol industry. From 2002-13 the use of corn for feed has fallen from about 58 percent to about 37 percent.

Even though the cattle industry is able to utilize the byproducts created from the ethanol production process, their efficiency as a replacement of corn is not comparable, considering only 17 pounds of distiller’s grains can be produced from a bushel of corn. Even in corn and ethanol country, we have challenges with the nutritional consistency of the dried distiller’s grains (DDGs) that we feed our animals.

The U.S. cattle industry has realized a significant economic impact due to the RFS mandate and the historic drought that impacted more than 70 percent of the U.S. last year. From 2007-10, the cattle-feeding sector of our industry lost a record $7 billion in equity due to high feed costs and economic factors that negatively affected beef demand. This type of loss is not sustainable for a segment of our industry that relies on corn, and as a result of the continued diversion of corn to satisfy the mandatory RFS, it is likely these losses will continue.

Over the past four years the average cost of gain to finish a beef animal in a feedyard has increased by more than $200 per head as a direct result of increased feed costs. These costs are not able to be passed along to the consumer and are absorbed by me and my fellow cattle producers. This trend is not sustainable and our government policies need to be evaluated in a manner that considers the economic impacts on all users of corn, not just the ethanol industry. The single biggest challenge for all of agriculture is Mother Nature, and even though the corn crop is expected to be a “bumper” crop this year, it is a stark difference from where we sat just one year ago during the historic drought and leaves uncertainty with future weather patterns.

EPA’s proposal acknowledges that the current policy needs to be re-evaluated. This is a great step in the right direction, and we hope EPA will work to retain the lower projections and work with Congress to consider long-term reforms that take into account the world we live in today and all sectors that use corn. Since the RFS’ enactment more than eight years ago, many factors have changed, and it’s important for our government policies to reflect the changes as they evolve.

At one time there was a need for government policies to help the ethanol industry find their feet. Today, we have a mature and sophisticated industry before us, and after many years of federal support, it’s time to compete on a level playing field with everyone else. Artificially diverting more of the corn crop to ethanol production is bad public policy.

In September, the Renewable Fuels Association encouraged the cattle industry to look at the flexibility of the RFS policy on the regulatory side of this debate. This is a step in the right direction as the policies in place are outdated, and on behalf of NCBA, we will continue to work with Congress to reform the RFS to allow all users of corn to compete on a level playing field.

It is becoming too common to see news reports of “mismanagement” by federal agencies. It is disheartening because as taxpayers, we expect agencies to be sound stewards of our money. We want them to be as frugal with our money as we have to be with it. So, when I read the headlines that the Wyoming Natural Resource Conservation Service (NRCS) may have mismanaged $14 million in its easement programs I was concerned and wanted to better understand what happened. 

I was concerned because I have a strong connection to the NRCS and an affinity for its work. In a past life, I was the staff director of the U.S. Senate subcommittee that had oversight of the agency. Later I managed the agencies interactions with Congress for the U.S. Department of Agriculture (USDA), and then I had the honor of serving as NRCS Chief. Now, I live, work, fish and hunt in Wyoming and enjoy the bounty of the landowners who work with NRCS to improve my quality of life. It was because of this background that I looked closer at the reports of mismanagement in Wyoming. I wanted to look past the headlines to better understand what actually happened and what was being done to correct it. 

NRCS and the USDA Office of Inspector General (OIG), the investigatory arm of the USDA, both reviewed Wyoming’s management of its easement programs and found that it had not followed certain agency regulations and policies. The reports attributed these failings to lack of knowledge and what the OIG characterized as a failure of the NRCS to foster a spirit of accountability among its Wyoming employees. Importantly, they found no evidence of fraud or abuse in their investigation. It is also worth noting that there was no indication of waste in the report. Good conservation got on the ground. 

Clearly, mistakes had been made in Wyoming. These mistakes were not recent occurrences, and it is possible that more errors may be found. The microscope that Wyoming’s program administration is under will, and should, continue until the agency completes all the corrective actions necessary to prevent future mistakes. That is part of the story that was not reported – corrective actions have been and are being put in place to help ensure policies are followed. In fact, the OIG agreed with the actions the NRCS is implementing. 

However, one caution that I offer to NRCS and would like Roundup readers to think about is why the mistakes happened. 

Sure, some of the problem is workload. Since the 2002 Farm Bill, the technical side of the agency has not always been able to keep pace with the funding delivered through the Farm Bill. The due diligence, oversight and planning that we expect from NRCS can sometimes take a backseat to new contracts. This does not mean that good conservation is not occurring, but it can lead to a lack of attention to detail in contract administration. 

Another cause, and one I saw in this investigation, is an effort to cut through bureaucracy. Regulations and policies are often written to address the lowest common denominator across a very diverse nation. They provide consistency and serve as a check on fraud, waste and abuse. However, to those on the ground they can also seem like nothing more than red tape. It can lead to staff cutting corners in the interest of not delaying projects and impacting landowners. They have good intentions and want to see good projects implemented without being hindered by what can seem to be unnecessarily complex and overly burdensome policies. 

I should be clear that I do not excuse the shortcuts and failures to comply with agency policies and regulations. Rules are there for a reason and are important to maintain the accountability in federal programs that taxpayers deserve. Additionally, despite good intentions, the shortcuts the agency made in the interest of helping landowners may end up affecting those landowners and the agencies partners. But, understanding why is important in preventing future problems.

So where do we go from here? We have strong leadership in NRCS Wyoming. They are transparent and open. They did not hide from the reviews and investigations, and they have been working hard with their colleagues to restore confidence in the Wyoming program. They have been fixing past mistakes and are working to improve program administration. They will continue implementing the corrective action plans that address the current mistakes and, hopefully, serve as a check on future problems. 

We can expect that good conservation will continue to get on the ground, but things will tighten up, and there will be more “process.” In fact, until NRCS at the national-level and Congress, through the Farm Bill, find ways to reduce bureaucracy and simplify programs, we will see more rules and more paperwork. I am confident, however, that NRCS employees at all levels want to make programs work efficiently and want to see good conservation on the ground. With willing landowners and strong partnerships, NRCS can find a balance that allows conservation to flourish within common-sense policies and procedures.

I left the agency in 2009 with the same admiration for NRCS that I had growing up. It is filled with remarkably dedicated people who want to “help people help the land.” They care deeply about the people in their communities and want to help them succeed. I can think of no better motivation for federal employees to bring about a culture of accountability and effectiveness.