From the 2022 NACD Annual Meeting. In an ever-changing environment, how do you manage the possibility of step-up in estate tax to ensure that your hard-earned legacy passes along to your family, and that they will actually be able to afford to hold onto it? This session will share a three step, three resources process to ensure that your family’s lifestyle will be continued into generations to come! With a few first-hand stories from his over 35 years as a farm and ranch financial advisor, Randy Fisher walks you through his process to guide your operation’s future in a way that is easy to understand and relatable.

2. Business
Succession
Plan
Is Really Business Success

3. Most People
Don’t Plan
to Fail,
They Fail to
Plan

4. ❏ Who are the key players
in a plan
❏ What are the key
elements of a plan
❏ When should I be
making the plan
❏ How do I get this done

5. Players:
Financial
Advisor
❏ Don’t have a crystal ball on
where market is going, but
they do have facilitator
ability to bring it all together.
❏ Be involved in
planning
❏ Help execute the plan
❏ Annual review plan

6. Players:
Tax Consultant
CPA…

7. Players:
Lawyers

8. Elements:
Write down
your goals
❏ Develop a game plan
❏ WRITE IT DOWN!

9. Elements:
❏ Establish discipline to carry out game
plan
❏ Still have flexibility

10. Elements:
❏ Rocket Science Not Required…KISS
❏ Rule 23.8

11. What is Rule 23.8?
❏ IRS Code allows for $11.9MM for a
personal exemption
❏ IRS Code allows for a spouse to use the
spouse’s personal exemption, if you file
the estate tax return upon death of the
first spouse
❏ IRS Code, therefore, gives a family $23.8
before any Federal Estate Tax is due
❏ Thus, the Rule 23.8

12. What is the Best One… It’s
Usually Simple
❏ First, when is the last time you did a
consolidated financial statement.
❏ Second, when was the last time you
updated it.
❏ Third, where do you fit on the Rule 23.8
❏ Fourth, if above 23.8 you probably need
help beyond the simple
❏ Fifth, for most of us, 23.8 covers us.

13. PLAN
❏ Whether its buy/sell
complicated or simple
❏ Wills
❏ Trusts
❏ DPOA for both financial
and health

14. Who is to Benefit? Why am I
Doing This Now?
❏ You could have family or close business partners
❏ You may want to protect your spouse and in the
modern family, my current spouse from greedy
children or others
❏ You may want to have a plan that satisfies
others, e.g. creditors or affiliated companies
❏ You may need to consider health issues
❏ Age is not the only factor
❏ Other… and this is a biggie
❏ What is why? Purpose?

15. Succession Means
Succeeding

16. ❏ CHANGE
❏ The degree of success of your
succession plan is directly correlated
to your ability to change

17. Most people don’t have a
plan because they haven’t
faced or considered death.

18. CPA
Accounting
Services

19. Key Tax Changes to Be Aware Of:
❏ Possibly lowering the estate exemption from 11.7 million to 3.5
million transfer at death and to only 1 million during lifetime.
❏ Elimination of step up in Basis for estates valued at over 1
million or 2.5 million per couple.
❏ Proposed Donut hole tax on self-employed income (if over
$400,000 income then another 12.4% social security donut
hole tax on $100,000 or $12,400) and the surtax being
potentially on all income versus investment income currently
and that is 3.8%
❏ Elimination of Like Kind Exchange on real estate (you are all
very aware of the hurdles this created when losing the ability
on other assets with prior tax law changes)

20. Ways to save on taxes through transition
planning:
❏ Gift now:
This preserves the estate exemption if done this year
and gift tax returns properly filed. The pro is this allows the
asset to pass tax free. The largest con is that the asset
does not receive a step up in basis. While it is nice to
receive a step up in basis, it may be more important to
consider cash needs for estate taxes. With current land
and machinery prices it does not take long to move past
the newly proposed estate tax limits if they are passed.

21. Ways to save on taxes through transition
planning continued:
❏ Charitable remainder trust:
These are good if you are charitable minded to move
unsold and unpriced grain into. This helps to avoid self-
employment taxes but you will have ordinary income as
you take money out of this trust. There is also an amount
that you have to leave in permanently for charitable
purposes (20%). There are also some potential risks if you
were to pass away prior to depleting all but the charitable
remainder portion.

22. Ways to save on taxes through transition
planning continued
❏ Set up new entities: This is more for partnership entities or the
schedule F farmer. C corporations can have individual stock
shares sold out over time so planning may be different for farms
that already operated as a C corp. It may be wise to create a land
holding entity that is separate from an operating entity or even an
equipment entity. This allows income to be taken over time for the
transitions. This is almost always favorable in most tax situations.
Navigating tax strategy and still leaving an entity in good financial
standing is sometimes difficult. If yous trip to many assets away
from an entity then you have a debt to equity ratio that is out of
line so keep that in mind for the operating entity as you move
forward with a transition plan.

23. Some entity types one may consider:
❏ LLC - easy to form and be able to sell items out or even
lease over to an operating entity to create a revenue
stream that may be necessary for retirement while being
able to control the amount of annual income. Also gives
flexibility to choose different tax types from normal flow
through sole proprietor, partnership, S-corporation, or you
can choose to be taxed as a C-corporation.

24. Some entity types one may
consider continued:
❏ FLP- this is a good choice to maintain control
of assets if you are hesitant on financial
decision making of transitional party.
Percentage of ownership can be transferred.
The income does not have to be distributed
on an annual basis. This has saved some
family farms when unexpected things
happen such as divorce. An ex-spouse may
get tired of paying tax on income that is not
distributed so may opt to not go after this in
a divorce or may opt to sell back for a
discount.

25. Some entity types one may consider
continued:
❏ Revocable Trusts - Allows assets to move in and out freely.
Usually not complex for tax purposes as the taxes are
passed through to the grantor until death. Step up in basis
is preserved if still available at death.
❏ Irrevocable Trusts - Can be more complex to create and
move assets in or out of. Has an advantage of preserving
assets if properly done for long term care if needed. Major
disadvantage is loss of step up in basis.

26. Key take home:
❏ It is not too early to begin planning for transition. This is
something that should be in forefront of people now. If you
are a young farmer and thinking, I may still be 20-30 years
from transitioning, you still may want to consider life
insurance while you are younger to help pay for estate
taxes down the road. Retirement plans and savings are
also key to having an easier transition if less income has to
be stripped out of the operation for retirement it has a
much better chance to survive through the next
generation.

27. Key take home continued:
❏ More thought needs to be put into this with the possible
tax law changes on the horizon. A lot of farmers usually left
the working assets to the children involved in the operation
and would try to even items up with cash to siblings not
involved in the farming operation. With new tax law
changes this may put the child or children that take over
the operation into a cash flow issue to be able to pay
inheritance taxes without having to sell operating assets.

28. Key take home continued:
❏ Use professionals: accountants, attorneys, and financial
planners should all be involved in working through a
transition plan. If one of them says to you, “I have this all
figured out, you really don’t need all those professionals
involved” I would find someone else because I am not sure
they are giving you good advice.

29. Retirement
03

39. Investments 04

51. Investments
Cornerstone Wealth Management provides
investment advisory services to individuals,
businesses, trusts, and retirement plans.
Client portfolios are constructed through the
ongoing purchase and sale of individual stocks,
mutual funds, exchange-traded funds, certificates of
deposit, municipal and corporate debt securities,
and US government securities. We consider the
individual needs of each client in making purchase
and sale decisions within clients’ accounts and will
make any necessary adjustments for each
individuals needs
Each asset allocation is an individualized strategy,
so clients are not just put into a model based on a
brief questionnaire.
Each individuals strategy is built on the careful
consideration of the key elements of their financial
profile.

52. Investments
❏ Investment Objectives: What the investor hopes to achieve
using this investment portfolio - improve current lifestyle;
achieve capital growth; fund a specific goal
❏ Risk Tolerance: This reflects the investors comfort level with
market fluctuations that can result in losses. inflation risk and
interest risk need to be considered as well.
❏ Investment Preferences: An investor may refer to invest in one
asset class over another based on a certain bias or interest
towards the characteristics of that class
❏ Time Horizon: the length of time an investor is willing to commit
to achieving his objectives

53. Cornerstone
Wealth
Portfolios
Principled Portfolio
Construction
06

54. ❏ Is what you are currently doing for your financial future giving
you a guaranteed increasing income stream for the rest of your
life?
❏ If you passed today, are you relatively certain your estate
(lifetime of hard work and accumulation, sacrifices) would be
distributed exactly as you desire, right now?
❏ IRS and court get 60% of it if not, is that what you desire?

55. What do we
believe?
Why do we
believe it?
Why does it
matter?
Why is our
approach
better?
Our Approach
A superior investment management strategy is one that is rooted in
steadfast principles, designed for investor behavior and based on
evidence.
Evidence shows time and again that investors, when left to their natural
behavioral biases, will make decisions that are often detrimental to their
goals out of greed and fear.
Investors have goals for their money beyond returns: living a
comfortable retirement, funding an education, supporting family and
causes, and leaving a legacy. Knowing a sound strategy is in place to
support these goals provides confidence in their financial future
Our principled portfolio construction seeks to address and mitigate the
ever-present behavioral traps investors face and keep them on course
for the long term. Our portfolios are designed to be tailored to your
needs, goals and - most importantly - your level of comfort with risk.

56. Our Principles
DISCIPLINE
BALANCE CONSISTENCY
FOCUS

57. Discipline
Discipline is having a defined, repeatable process that is:
❏ Evidence based
❏ Rooted in fiduciary standards
❏ Long term in nature
❏ Constructed for the client interest not a business interest
❏ Mindful of taking informed risk
❏ Ever striving for improvement
❏ Humble

58. Focus
Focus on the Right Things: Qualitative Screening
❏ We use a proprietary scoring system, Cornerstone Select
Score (CSS), for selecting funds
❏ CSS uses 18 criteria weighted by effectiveness,
such as performance, organizational stability and
fees.
❏ CSS is built on approximately 1,000 lines of code
and tested with 44.5 million data points (total of
5,000 lines of code for CWP process).

59. Focus
Focus on the Right Things: Fundamental Research
❏ Each manager completes a detailed questionnaire on key
categories like investment process, portfolio guidelines,
key differentiators, performance, investment team and
trading.
❏ Thanks to our scale, we can have personalized, in-person
due diligence meetings with members of the investment
teams from the managers we are considering.

60. Focus

61. Focus
Looking for the Right Fit
❏ Our investment selection process helps us identify a small
number of quality managers that offer the potential to
outperform their peers and respective benchmarks over
time.
❏ We consider managers’ resources, collaborative
judgment, company research, team-based approach
❏ We look for consistent results, historical track record, low
expenses, minimal conflicts of interest
❏ We include investments that have the least risk necessary
to pursue long-term financial goals.

62. Balance
Principled Portfolio Construction
❏ We believe it is essential to diversify by security, asset class
and investment manager instead of making concentrated
bets
❏ We construct diversified portfolios with strategic asset class
weightings but make tactical adjustments as irrational market
behavior presents opportunity
❏ Strategic Allocation: risk tolerance drives initial portfolio
allocations
❏ Tactical Adjustments: informed by market valuations,
interest rate environment, earnings expectations, global
macroeconomic environment

63. Balance
❏ Our framework, not a date on the calendar, guides when
we rebalance portfolios and which asset classes we
rebalance.
❏ Strategic Rebalancing: when allocations deviate from
acceptable level of risk
❏ Tactical Rebalancing: when market dislocations
present mispriced opportunities

64. Balance
Principled Portfolio Construction
❏ Portfolio construction and ongoing rebalancing decisions
are informed by:
❏ Proprietary Key Measures
❏ Data aggregation of manager and portfolio-level
sector, credit, allocation, style, and factor exposures
❏ Monitoring tool for overall risk, over/under exposure,
trends, etc
❏ Provides aggregated model data both on a portfolio
level and for specific asset classes such as U.S.
equity, international equity, and bond.

65. Balance
❏ Economic Environment
❏ Team Research
❏ External Research
❏ Investment Insights

66. Rebalancing: An Alternative to Predicting the Market

67. Rebalancing: An Alternative to Predicting the Market

68. Consistency
Persistently following our discipline:
❏ Quantitative and Fundamental Research
❏ CSS updated monthly
❏ minimum of annual PM meetings
and manager due diligence
❏ Portfolio Construction/Rebalancing
❏ Key Measures updated weekly
❏ Consistent delivery of risk-adjusted
performance across all models
❏ A proven, tested, professional process
with 10 years of GIPS compliance
❏ Core approach has not changed
other than to evolve
❏ Evidence-based approach blended
with humility and an ongoing quest
for improvement

69. Consistently Strong Results

70. Consistently Strong Results

71. Consistently Strong Results

72. Consistently Strong Results

73. Working With Us
A Solution to Fiduciary Responsibility
❏ Our team knows and follows best practices, standards, and
laws
❏ We diversify assets to specific risk/return profiles, as well as
avoid conflicts of interest and prohibited transactions
❏ Cornerstone Wealth Portfolios prepares an investment policy
statement, uses and monitors the activities of “prudent
experts” and documents our due diligence
❏ We have 10-year compliance with GIPS standards
❏ We control and account for investment expenses
❏ We offer a definable, defendable, repeatable, and scalable
investment management solution to your business

84. THANK YOU