[00:00:00] Speaker A: Foreign.
[00:00:13] Speaker B: Welcome back to another episode of Conservation Stories. Conservation Stories is a podcast brought to you by the Sand Hill Area Research Association, Sarah, as we like to call it. And SARAH is a nonprofit that's focused on all kinds of things that have to do with farm, ranch, rural economics, water, produced water, all kinds of things. We have a lot of interest in our fingers and a lot of pies. And I hope that if you have a moment, you'll take a look at our
[email protected] and look at the information we have provided there. For you. Today we have with us Garrett Coutts. Garrett is a lawyer here in Lubbock and I heard him speak on secession planning in at the Chamber, a chamber event. And I thought it was really good and wanted to have him on to kind of discuss that a little bit more and kind of what he does here in Lubbock for his customers. Garrett, thanks for joining us.
[00:01:14] Speaker A: Yeah, you bet. Thanks for having me. Glad to, glad to get the invite.
[00:01:17] Speaker B: Well, could you start off by giving our listeners a little bit of your background and, and tell us kind of who you are, where you came from, what you do?
[00:01:24] Speaker A: Sure. Yeah. So I grew up in Pampa, Texas, way up there in Texas, Canada, way, way north. But I went to undergraduate at Texas Tech in Lubbock Tech and then I also went to Texas Tech Law School as well. We, we drank the red and black Kool Aid in our house and but we love, we love everybody. I'm actually in College Station today, so I guess Giga Maggies too, I guess.
But I'm a partner at Brady and Hamilton, which is a ag focused and business focused law firm in Lubbock and Austin. I work in both of our offices. I'm primarily in Lubbock, but I come down to Austin quite a lot as well. And we cover all the state of Texas as well as a few of us are licensed in New Mexico as well. And most of our clients are ag. And so glad to be getting back to ag roots in my law practice and we really love it.
[00:02:09] Speaker B: So awesome. So when you say you're doing ag work, what kind of, what does that entail? Are you, when you're in Austin, are you doing policy lobbying work?
[00:02:19] Speaker A: Sure. Yeah. So we don't do a whole lot of that. We certainly have done some legal work and still do some legal work for, you know, some ag associations, but we don't do direct lobbying. There's kind of a whole other bucket of things that come along with doing that. But we do represent a lot of Ag associations for things. In addition, from the Austin and the Lubbock office, one of our big portions of the firm is landowner representation and eminent domain cases. So that's kind of the big one for the firm writ large. And then I'm the only transactional, solely transactional partner. So I do basically all the transactional work. So whether that's business entities, fsa, USDA stuff, estate planning, probate, all that kind of stuff.
[00:03:00] Speaker B: Garrett, when you are talking about things that you do here in Lubbock for landowners, Intimate domain, of course, is something that's come up recently. There was some misinformation about what was happening in, in the Muleshoe area, so people got concerned about intimate domain and that kind of stuff. Do you see that happening anywhere in our area? Intimate domain?
[00:03:21] Speaker A: Yeah. Eminent domain projects are rampant in Texas. And I don't mean that in a negative way. It's. It's in many ways a good thing. It's pretty project specific and where you're at on the project, how you might feel about that. But we use imminent domain, and the state of Texas uses imminent domain for lots of things. You know, the most common roadways, highway expansions, gas lines, power lines is a really big one. With all the renewable energy projects coming online and just the energy demand in Texas, power lines is a big one for transmission in the state.
[00:03:49] Speaker B: That's going to get even bigger because we need to beef up our grid big time.
[00:03:53] Speaker A: Yeah, that's right. And there were already. And those take, I think, one thing a lot of people don't realize about doing a domain. And if you really want to dive deep on that, there's plenty of attorneys at our office that, that are. There's attorneys at our office that. That is their actual daily mojo. Those take years to come into play. So, I mean, if you're seeing a transmission, you know, line coming through where you are, that was put into play a long time ago. It. It takes a significant amount of time to get through the process. So we represent landowners only, we never represent the developers on those.
And sometimes we're fighting about the route. So where is the line or the road or the pipeline or whatever going to go? Sometimes we're just fighting about compensation.
Sometimes we're fighting about the things that come along with compensation, such as, you know, maybe when are they going to break ground or the compensation for your crops or things of that nature. So there's lots of different facets to it.
[00:04:42] Speaker B: So is it. You always think of it in a negative context, but it's. It can it can be beneficial for the landowner if. If it's within the realm of their goals for their property or if it's making them money or something.
[00:04:54] Speaker A: Sure. Yeah. And sometimes depending on when you enter, it really is dependent upon when you enter the process. Right. But sometimes there are certainly ways to influence the project. You can't always do that. It depends. Right. Don't anyone to take that home and think they can. But you know, if you're, if you enter the project at the right time, if you have the right leverage, there are some things that can be done. And while the developers for the most part want their project. Right. Just depends. Sometimes we have really great relationships with them and we can really work some things out. Some developers are really great to work with, some are not. It just kind of depends. So I would say one thing that a lot of people misconstrue because I'm certainly not our imminent domain expert in the office. I work a lot on them. But on the transactional side, all the rest of our attorneys do Eminem domain day in, day out. But one thing that I frequently find people misunderstand because I do negotiate a lot of energy leases for our clients, whether that's, you know, solar, wind, whatever.
Those companies do not have the power of imminent domain. So if you don't want to sign a solar lease on your farm, you do not have to. Now, what does have an imminent domain is potentially the company that's building the transmission line to move power across the state. That's different. But people kind of conflate those and they get really concerned that they're going to be forced to sign a solar farm or something. And you. That is not the case, then that.
[00:06:11] Speaker B: Could explain some of the trepidation about wind and solar that people feel like, oh, if it's coming in, they're going to be coming after me.
[00:06:18] Speaker A: Yeah. And usually, usually what drives people to. In those situations that aren't really, for lack of a better word, hot on the idea of having a solar farm is they're like, well, if my neighbor's going to sign it and I'm going to have to look at the things, I'd rather get a chunk of the change too. That's kind of the driver. But it should not be imminent domain.
[00:06:35] Speaker B: That's interesting. Yeah. And I always, I get so tickled too. I mean, I get it. You can see them from a long ways off. But man, pump jacks are not really attractive either.
[00:06:43] Speaker A: Yeah, that's fair. That's fair.
[00:06:46] Speaker B: They are not a beautiful thing that's completely fair.
[00:06:50] Speaker A: I don't have any of them decorating my house.
[00:06:52] Speaker B: No, right, I know. Now, wouldn't mind if they were decorating my property. Yeah, exactly. Yeah. Anything. Yeah.
[00:06:59] Speaker A: Wouldn't mind spotting a few.
[00:07:00] Speaker B: As long as, as long as I own the minerals.
[00:07:02] Speaker A: Yeah, that's right. Yeah. We could have a whole, whole nother conversation about that.
[00:07:06] Speaker B: Yes, exactly, exactly. Well, give us a little bit about what are some of your, you know, you were saying this is. Here's the difference between what has intimate domain and what doesn't. What are some things in contracts? Let's say a landowner has a solar developer come to them and they want to, you know, get a lease from them. What should people be looking for?
[00:07:32] Speaker A: Yeah, there's, I mean, there's a whole lot of different things. And I usually when a client first calls me and says, hey, Winco or Solarco has approached us, what do we do? Well, the first thing is I'm like, well, let me see whatever they've sent you. Right. Because there's no, there's no point in me shooting blank if they've given you something to look at. But there are certainly some big items that are frequent problems or frequent issues that get negotiated on those I found recently. So one big one that I think's timely given that the legislature restriction to go back in is last legislative session. Right. We just had Winter Storm Uri. There was a whole lot. There was a breakdown of the energy grid in Texas. We all know how that kind of went sideways and some not good things happened. Out of that came several new regulations and statutes about the Texas energy grid from the Texas Ledge. One of those things being that renewable projects and energy projects in general going forward needed to incorporate more battery storage in their project. So in other words, if you're in the design stage energy cos of some new project, you need to bacon there some battery storage. Okay. What the renewable companies have taken that to mean is, oh, we'll just stick battery storage in our leases that we're fixing to sign with landowners and get to use their land for that as well. No, that is, that's not what that means. So you'll probably find if somebody's listening to this, if you just got one of these in the mail or something, flip through there and I guarantee you you're going to find something that says, oh, we can use this for a solar farm or for a battery field if we feel like it's. No, the. My rule of thumb on that is always absolutely not. You are agreeing to a solar Farm or wind farm, not a battery farm. And if they want a battery, that's fine, but we need to negotiate how they're going to pay for that. That is separate, that's separate compensation. That is separate from the rent they're paying on the wind or the solar. That's all. That's a separate item.
[00:09:23] Speaker B: So what do those look like? Because I've, that is something I have yet to see.
[00:09:27] Speaker A: That's a great question. And it'll depend on what the purpose of the project is. Right. If it's solely a battery project, it could be large, larger than this. But typically when it's paired with a solar farm or paired with a wind farm, in other words, that battery is probably for that particular farm. They, they're usually, they want 10 acres or less. So, you know, 5 to 10 acres, it's a relatively small footprint by comparison to the actual solar farm. Right. But the liability is a little different. And we always talk with clients about that because we're like, okay, but it's, there's a difference between having some solar panels out there and having a supercharged battery pack out there. Right. And so we need to talk about maybe placement. You probably don't want that in the middle of the field. You probably want that on the edge by the road, or you want that separately fenced from everything else or you know, things like that. But as far as footprint, we usually limit it to 10 acres or less. And I have found almost every energy company I have dealt with is comfortable with that.
[00:10:24] Speaker B: You may not be the person to ask about this, but I know that they are not holding a lot of these batteries don't hold a lot of hours worth of energy.
[00:10:32] Speaker A: Yeah, it depends. So the energy, and I'm certainly not no one quote me as a scientist by any means, but the energy does dissipate relatively quickly. It's getting better and better every day. Right. That they're constantly working on it. But it's certainly not like, you know, you could fire one of these up weeks from now and it's going to be charged. That's not how that works. But they will store a significant amount of power for a relatively short amount of time. The current thought process, 30,000 foot view on those is, well, they're really useful for solar because obviously every 24 hours we have this big chunk of darkness called night. And so it's helpful for that purpose. But at the moment they're not like substituting for days upon days of power.
[00:11:15] Speaker B: Yeah, I know. I was recently at a, like a community farm in Oklahoma, and they putting up solar panels that had a new director that came in, and she said, y'all, the director for her got those through this grant. They've just been sitting there. And she said, so we had them put up. And then I, then I contacted the company because they're like, well, they, they won't do anything for you at night. And she's like, I have greenhouses. Like, that's when I need them. I don't need them during the day because I have a greenhouse.
[00:11:44] Speaker A: Right. I need the power. Right?
[00:11:46] Speaker B: And they were like, well, you're going to have to buy a battery. And she's, what is the help point of them getting these if they. They don't meet our need? What is the point?
[00:11:53] Speaker A: You know, yeah, the batteries can be great. And I. We have lots of clients that, you know, we've had clients that have said, well, I don't want the panels or I don't want the turbines. But my neighbors all signed them and they need my land for the. The line to collect them. The collection line to collect the power between the two farms. Okay, I'll agree to that. To be neighborly. You know, this is an opportunity for my neighbors. I'll agree that. Or they've agreed to the battery. They've said, you know, I don't want my whole place covered in panels, but you can have the lower corner, 10 acres to put the battery on. That's fine. So I will say, good silver lining, positive note here. The, like, ag neighborliness thing is still going strong.
[00:12:31] Speaker B: That's good. That's good to know. So are you seeing any. Are you familiar with the term agrivoltaics? So.
[00:12:37] Speaker A: Oh, yeah.
[00:12:38] Speaker B: Okay. So are you seeing any of. Any of that happening?
[00:12:41] Speaker A: In my experience, and there's plenty of more experienced and amazing ag colleagues of mine that do ag law in other parts of the state, too. I haven't seen it widespread in Texas, and certainly when this all kind of kicked off in earnest, you know, wind's been around for quite a while, but solar certainly has kicked off in big earnest probably in the past four or five years, in my opinion. It wasn't very common in Texas, but it has become more common. I've seen more and more landowners requesting that and more and more companies agreeing to it. And I think one thing that's shocking when we talk about this, so, for example, like the American Ag Lawyers association, which is the American Group of Ag Lawrs across the country, we talked about this every year at our convention, November. It's always a Blast. And we. It's a great time to get together with everybody and we talk about this because that's always a topic. There's always a renewable topic at the conference. And it's always shocking to our Texas contingent because they're like, oh, yeah, this was a huge farm up here in X state. It was like 50 acres. And we're like, well, okay. I mean, in Texas, they're not. They're not even. They're not even looking at doing a solar farm unless you. They can accumulate, you know, 2 to 5 to 8,000 acres. They want a small country. And so the difference of, oh, you have to raise these panels up and allow us to graze our goats or whatever on 50 acres versus oh, you have to raise these panels up and allow us to graze on 2,000 acres is significantly different business considerations. Right. And so I think that's why we've seen it at a slower pace here, in my opinion.
[00:14:12] Speaker B: Right. So. So for people that don't. No, that is a very weird term. So agra, meaning ag production, Voltaic, meaning energy. So it is the combination of energy and ag together on one plot of land. So I've seen. I've seen YouTube videos in France where they'll have solar panels on wire. So they're. They're strung on wire high enough that combines can harvest soybeans.
[00:14:43] Speaker A: Yeah, yeah. So, and the one, the one. The common one you'll see in Texas more and more is spacing of the panels. So that. And that's one I. I honestly didn't think about when I first started is they'll say, well, we can't raise them, but we can space them out. And so you can have essentially, like, grazing rows, things of, like, that nature. And so there are ways to do it. And I think that's the one thing if we're gonna. We've kind of veered to energy stuff, which is fine. I'm fine with that. The. The topics I'd give people to remember on these are, well, I'll give you all the same spiel we give most of our new clients. And when they call about this and I say, is this your first rodeo with one of these renewable. Renewable guys? They say, yes. And I'm like, okay, well, buckle up. So the first of all, it's going to be slow. It's going to be slower than you want it to be. It's going to be slower than they want it to be because they want a deal done so that they can get their grant money or whatever they're getting and get their funding and turn around and sell this to some big energy company elsewhere and be done with it. You want it to be done so you're not paying me the lawyer and you, and maybe you get your first bonus check from them or whatever. And so everybody's trying to rush to the finish line and we're typically the bad guys hitting the brakes. Because I'm like, these things last for decades. You know, you're talking 40 to 60 years with extensions. And so, you know, I kind of tried to tell people, like, look, even if we just took one week for every decade, we're already talking about eight weeks or six weeks or, you know, somewhere in there. So we got, and I think it should take longer than that. So let's slow down a little. And then on top of that, these things are like, they're not short. I mean, if you get a full blown wind or solar lease, you're looking at in 40 and 60 pages. And the fun thing about us lawyers is we got to read every single page. So you got to give me a little time to do that. Right? And so it's just kind of slow. So I try to warn everybody, just kick your patience in gear. It's going to be a little slow.
[00:16:53] Speaker B: Out here on the Texas plains, water is everything. And there's a resource that's as vital as it is fragile. Our Playa lakes. These lakes are nature's reservoir, catching rainwater to recharge our aquifer and provide lifelines for wildlife. But now they need our help. In collaboration with the Texas Pillai Lakes Conservation Initiative and the Cargill Global Water Challenge, Sarah has started the Our Legacy is Tomorrow's Water initiative to inspire and work with landowners to restore and protect our Playa Lakes. Each playa we save helps secure a sustainable water future for the generations that will be coming after us. Whether it's improving soil health, restoring habitats, or recharging groundwater, we are committed to making a difference. Together, we can build a legacy that we can all be proud of. To learn how you can join in, visit the Playa Lakes Restoration Initiative page on the SARAH website. Let's keep Texas water flowing strong for the future. Visit sara-conservation.com well, so I also, I would say my day job is a landman. I'm a landman by trade and so I've done some solar leasing and absolutely it does take a long time and they do often sell off to someone else. So the person that you make the deal with, you know, is you just never know for sure. You know, I mean, some companies that I thought would never ever sell. This is their gig. They're gone, you know.
[00:18:32] Speaker A: Yeah. And we tried to tell people that about the. Frankly, the landman, right. Because typically they like the landman, right. That came out and I'm like, look, this landman is probably doing their job well. Right. Like, they probably are telling you the truth that they know as it is right now. But the problem is if this company sells, that landman's not involved anymore. And we're 30 years.
So at the end of the day, the only thing you can rely upon is what's written in black and white ink in this lease. So that's why we got to spend so much time on.
[00:19:02] Speaker B: Exactly. Well, and you know, as a landman, for often I will be like, you know, it is likely if, you know, we, at some point, especially if it's, you know, minerals, we're going to come back to you. We want to make sure that we have a good relationship with the landowner, you know, and that. And so that, that means you really want to have. Make sure that you're working for companies that you feel comfortable representing, you know, but I, and then that back to that. This.
A couple of the companies that we've done jobs for, like, we don't, we. If you don't take it to, we'll pay for you to take it to a lawyer. They will cover your legal fees because we're not comfortable with you signing something you haven't had looked over by your own lawyer.
[00:19:44] Speaker A: And that's another good point too, that many of the energy companies will give up to a certain threshold, certain cap. They'll say, we'll, we'll contribute this to your attorney's fees, and that's, that's normal and good and you should expect that. And I, I don't, I don't care if you have. That's one of those things where I don't think it matters how much leverage you have. If you have five acres, if you have 5,000 acres, they ought to be paying something towards your lawyer bill. And so lots, lots of things I could give you. I could give you a whole list of things you should ask for in a lease, but many of them are dependent upon whether you got the leverage or not. That one, I don't think it matters. They ought to pay something.
[00:20:18] Speaker B: Yes, absolutely. Absolutely. Well, so shifting gears a little bit, let's talk a bit about secession planning and some maybe new trends that you're seeing or ideas, things that are happening. What, what are some, maybe just high Points of what people need to be knowing about and thinking about.
[00:20:39] Speaker A: Sure. Yeah. So I love this topic. My estates and probate things, which are two very different parts of practice, but states and probate. And I. I speak about this a lot. And I've. I do various forms of a presentation. Some of them are 30 minutes, and some of them are an hour and a half. And so we could get real deep real quick. But I'll try to keep it light for today, for time. So when we're talking about estate planning in the ag world, we tend to call it ag transition planning or transition planning. Because when you just do estate planning, most of the time, what that ends up meaning to the average person is when you're dead. The problem is with ag, you probably need to do some transition work with the generation behind you before that.
So we tend to call it ag transition planning because we're not just planning for your passing, but how you want to get the operation smoothly transitioned to the generation behind you. And so that's one thing I'd say. The other thing is it's a team sport. I always tell people that. I'm like, it's great you have a lawyer. I'm glad to do that. But I'm probably going to want to know if you have a cpa. I'm going to want to talk to that cpa. If you have a. If you have an investment person, because y'all have a JP Morgan account or a Morgan Stanley account or Charles Schwab account, I want to talk to that guy.
You know, we're all going to powwow together, and that's what you want. So that's. That's kind of that portion. And then probate is obviously, after you passed. How do we actually go through the court system of getting things passed on?
[00:22:08] Speaker B: So are. Are other businesses as complicated as it seems to be to transfer ag? I mean, ag?
[00:22:18] Speaker A: No.
[00:22:20] Speaker B: It's so complicated.
[00:22:22] Speaker A: And there's two reasons.
[00:22:23] Speaker B: Yeah, I was gonna say explain that. About why.
[00:22:26] Speaker A: I'm sure there's more than two reasons, but there's two really common reasons. And I hope any other AG lawyers here disagree with me. If you don't, feel free to send me a nasty gram. But two, in my opinion, debt. Because many businesses have debt, right? But AG has constant, continual, annual renewing debt. Most. Most producers, right? Not everybody, but most. I got a few clients that aren't, but most. And then on top of that, that debt many times isn't associated with, like, a business entity that will just keep rolling upon the Death of the ag producer. It's usually a general partnership or no, no partnership at all. It's just in their individual names. So whenever they die, everything halts. Right. Whereas if I own a, I don't know, a bakery, and it's Cout's Bakery llc, when I die, that LLC in all likelihood just keeps on rolling. Right? As long as the entity itself has been set up properly for the most part, nobody has to intervene to do a whole lot. And the debt is the entities. So the debt do they just keep paying the note, Right. And, and the. So those two go together. Debts one, and then business structure is the second one. And so typically when I give this ag succession planning cle their topic, I usually cover presentation. The first topic I cover is business entities. Because I tell everybody, I'm like, there's no point in me organizing what you're going to pass on if what you're going to pass on is just a mess. So let's clean it up first. And the reason that we cannot have the frankly, very common place business entity options that any other business has the choice to use is because of the Farm Bill, you become disqualified. I'm sure you know this. You, you will disqualify yourself from many FSA USDA programs if you opt to use like an LLC or a corporation. And so, or if you don't disqualify yourself, you're significantly reducing what you might have been eligible for had you just been a partnership or sole proprietorship.
[00:24:22] Speaker B: Now. So for the people that are in the back row, think, you know, on, yeah, explain why they made that change in the Farm Bill. Because it is something that has, you know, I know ag's been trying to change for quite a while.
[00:24:33] Speaker A: Yeah, they have. Yeah. And we see a glimmering light, yes, with the current hearing that farm Bill being debated, but we shall hold our breath. So this has been debated over and over and over again, including when I was on the Hill working on Farm builders forever ago. And the gist of it is on one side of the political spectrum, you have people saying, well, we don't want big corporate farms abusing FSA dollars. Okay, that's fair. And what essentially what they're saying is we don't want some big corporation forming like Couch Family Farms LLC and collecting an FSA check when they're not eligible for FSA checks because they're not individual farmers and they make too much money, but they're hiding behind this business entity structure, basically the shell entity game. And then on the other side, you've got, you know, the other political spectrum saying, well, okay, we understand that, but, you know, we need all these producers to be able to use ag entities for all kinds of reasons, like what Garrett's screaming about, which is like estate planning, but also for lots of other reasons. There's lots of benefits to using.
[00:25:35] Speaker B: Well, yeah, not to mention tax benefits. I mean, like the reason everybody else does those things.
[00:25:40] Speaker A: Yeah, sure, Right. And so they're like, well, okay, so how do we meet this middle ground? So the middle ground forever ago was essentially, okay, you can use partnerships because those typically just get the taxes passed on to the partners anyway. So we can track it through their taxes how much those people actually make. Therefore, we can determine if they're over the income threshold for FSA eligibility purposes. It's called pass through rule. Right, or the look through rule. It's called look through for fsa. So that's what we've operated under for quite some time. So if you had a gym, that's why you see all these farm operations that are like couch family partnership, gp. And it's because they did that, because one, it was just common, and two, you maximize your potential FSA eligibility if you took that same farm. Let's say there's three of us, I got a few siblings that says three of us, and we're in a general partnership. All three of us qualify for FSA payments. We meet all the other marks. We could in theory get three FSA payments if we put that same farm, same crop, same everything, into Kalts Family Farms llc. Now all of a sudden we are going to get one payment because they're paying the entity, not the three of us. And so they don't, they don't give you the look through benefit on any other entity than partnerships, general partnerships. So what we've been trying to do forever is say, give us some leeway, let us use. Because like I said, if I have a bakery, I can do, I can do whatever I want. Corporation or llc, why can't I do that for an ag business?
And so my understanding of the current bill, which could change any second, is that they are attempting to meet a middle ground that says, okay, we're not going to open the floodgates for all entities, but we're going to say, if you have an entity that has elected a particular tax treatment, like a pass through tax treatment, like a partnership, then we will apply the same look through rule we apply to partnerships to that entity. So in layman's terms, that means LLCs that have adopted for pass through taxation because most LLCs can do that. Not all of them, but most of them. So we might be able to, in the new farm bill, should it ever get passed, use LLCs in many instances. And that would be a huge benefit to ag producers for a lot of reasons.
[00:27:51] Speaker B: Well, it's annoying to me that you could have a, you know, couch and Sons furniture and they don't care if how big you get. Right. You know, but if you have people think that these corporate farms are not family farms. That's so. And that's stinking. That just annoys the heck out of me.
[00:28:13] Speaker A: Yeah, there's plenty. I mean my, my sister, my sister's in laws, you know, they've had a family farm for generations and it is a corporation and, and um, but it's just the kids, you know, and so. And even under this new rule, they would still not get to maximize payments. They would still be capped at one. But if it were an llc, for example, they potentially could get back to more maximized amounts. So anyway, we'll, we'll see where it goes. We're, we're kind of holding our breath. Similar provisions have been proposed before and they typically get traded at the 11th hour in exchange for additional funding for one program or another.
But my understanding is this is in both versions of the bill at the moment, House and Senate side, which is the first time I'm aware that that's been the case.
[00:28:55] Speaker B: Yeah, well, Tiffany Lashmid, I don't know if you noticed that she and Bart Foster and somebody else, they wrote a. Yes, a good paper and actually for.
[00:29:05] Speaker A: It was astounding.
[00:29:06] Speaker B: Great paper and funny at times. I don't know if you caught, of course some of the.
It was entertaining. I was entertained. But I'm a total nerd. So, you know.
[00:29:16] Speaker A: But yeah, I think it wasn't her. It was Bar and Tiffany and I think it was Shannon Farrell from osu. Is that right? Professor Cheryl. But yes, it's a fantastic paper. It was great. It laid out the history and it was great.
[00:29:26] Speaker B: Yeah, really interesting. We may actually link to that for any other nerds that are listening to us. We'll link that on our show notes. On our show notes. So business entities, we kind of did a little rabbit trail there.
[00:29:38] Speaker A: But yes, gotta get your, Gotta get your affairs in order, otherwise we're just gonna pass on a mess. But once we do that, you need to get obviously an estate plan. I think everybody knows about a will. Everyone's heard about a will. But I've found that most people don't realize a will can do a lot more than just say, oh, I want the family china to go to Billy. Your will can control how your debts are paid in some instances. So it can say, I want you to use this. These assets to pay the debts first, and then these assets second, and then these assets third. In some instances, you can do that, sometimes you can't. There's. There's a statute on that as well. You can lay that out. You can, of course, appoint executors. You can give what powers you want to those executors or limit the powers of those executors. That's very important, particularly when you're talking about farm families. I'm sure everyone's heard of the family farm getting sold during the probate, and everyone's mad or whatever, right? Yeah, that happens, right? Both those are important gifts. Gifting in your will is very important. Some people want to give to Texas Tech, for example, or some other charity. I'm doing a probate right now for a sweet, sweet little man that passed, and he. He gave all kinds of gifts to his church and a couple universities. And, you know, those things are important. So the will. Wills can do a whole lot of things. And for my young couples that come in, a very important thing to know is your will can also establish the guardians for your children should something happen to y'all. So, and the example I always give, it's a little morbid, but happens. You're all headed down to the Houston show or the San Antonio show or whatever, and you're all in the same vehicle, and something happens. Well, your kids might have gone from both parents to no parents. And so you. It's important that you get that in place. And your will is a very, very good place to have that lined out. So wills are important, but on top of that, there's also powers of attorney, such as your medical power of attorney, your legal power of attorney, directives to physicians, which is whether you do or do not want life support, do not resuscitate. So whether you do or do not want resuscitative care. And now that got changed in 2018, we can only do those for out of hospital scenarios. The. In inside a hospital, the hospitals have complete control over that. You have to use whatever form that hospital wants to use.
[00:31:37] Speaker B: Oh, you have to use their form, but you don't. They're not making the decision. You just have to use their form.
[00:31:43] Speaker A: If you want to elect for a dnr. In other words, do not resuscitate me while you are in a hospital, you have to use the hospital's procedure to.
[00:31:51] Speaker B: Do so, which is so interesting because what if you are like in a position where you need to be resuscitated, you can't actually like fill out that form.
[00:31:59] Speaker A: Which is why the default, which is why the default is they will give you resuscitation. That's why you, the default is if they find you and you're not breathing, they're going to make you breathe.
[00:32:07] Speaker B: They're making.
[00:32:08] Speaker A: So if you, if you don't want them to do that, that's when you sign a dnr and so that it's now called an ooh, DNR out of hospital. Because it's, it's for any scenario that's not at a hospital. So there's that and there's a state form for that. It's, it's issued by the Texas Department of Health and you have to wear a certain device. I had a sweet little lady when I was a baby lawyer and you know, you know nothing. And we're doing one of these and I'm explaining it to her and she said, well, I have a question. I said, okay, sure. Yes, ma'am. She said, well, so am I just supposed to carry this thing around with me or what? Like, if I go down at the Walmart, how are they gonna know I have one of these? And I thought that is a fantastic question. And so the answer to that is you wear what's called a DNR device, which is a super fancy way of saying one of those slightly ugly little bracelets they sell at the pharmacy counter that has something.
[00:32:51] Speaker B: Yeah. Huh.
[00:32:52] Speaker A: And they sell necklaces, they sell bracelets, they sell all this stuff and you're supposed to buy it from one of the state approved vendors and they list those on the Texas Department of Health website. And if you're wearing one of those and an EMS guy comes running up to you or gal and they see you wearing one of those, they are not going to give you resuscitative care. Because that, that you wearing that piece of jewelry is, is equivalent to them seeing the signed document. So that's all, that's all important. That kind of be the package of things we do for people. There's also like pet trusts and things like that. I love my dog. He's getting everything I own.
[00:33:22] Speaker B: No, no, I, I have to know. I mean, I know that there's, that's happened before that people have, you know, left the care of their pets in trust and left money in a house even.
[00:33:33] Speaker A: Oh, sure, yeah, yeah, you bet. I think when I was in law school, which is quite a long time ago now, there was a really famous case because an artist or someone had passed and they left all of their funds to their cat. And I mean, it was like a significant amount of money. It was like, you know, $30 million or something. It was insane. And so you can in fact do that. Most of my clients do not do that, but I, we do offer to do that. And then organ donation is also something we typically talk about. And so you do all, all those things are part of the estate process and many others.
[00:34:02] Speaker B: Well, I would definitely want to know that my cats are being taken care of. And, and that is not a joke.
[00:34:07] Speaker A: Yes. Yeah, listen. Yes, my, my lab is the number one thing being taken care of in my will. But yeah, all those are important. And, and I will say when you go to talk to a lawyer about this stuff, it is. And expect, especially for ag people, we tend to be a little more private, or maybe the generation before me did. Mine tends to be a little loud. But you know, I have to ask some people some, you know, kind of invasive things. And so I tend to warn them about that. I say, now listen, I just want you to know I'm not being nosy, but I am going to have to ask you some things. So for example, religion tends to play a very big role in some of the things we choose or do not choose in these estate documents. And so I'm going to ask you about whether you have a faith and if that faith is Christian. I'm going to ask you which denomination of Christianity. And so, for example, the Catholic Church has many, many, many rules about end of life care and life support and certain medical procedures. And so anytime I have a Catholic client, we do something different than what I might do for a Protestant client. So I would say don't be scared by that. Your lawyer is not going to talk to anybody about what you talk about with us. That is, that is attorney client privilege information. And you know, don't, don't be shy about that. And your lawyer needs to know that info so we can get it right. It gets interesting. I did have a. I hope he doesn't mind me sharing. I won't share his name, but one of our law clerks one summer at firm had no interest in doing transactional law. He was a litigation clerk, meaning he's a law student working for us in the summer. And he wants to go into trial type work after law school, which I avoid like the plague. And sometimes, sometimes Zach will wrote me into him now and then, and that's okay, but it's. It's negotiated every time. Anyway, this. This young man, I said, hey, I'm doing an estate intake today. And you. I just think you ought to watch. I know you don't want to do it, but it's something new and you ought to. You ought to witness it and just see what it's like. He's like, okay, so, you know, we do the meeting and it's a couple hours and the clients leave. And I swear he came and asked me for an hour questions. Afterwards, he had pages and pages of notes. I heard him talking in the kitchen with some of the other clerks and staff later in the day, and he said that was crazy. And they said, what do you mean? And he was like, well, I thought it was going to be pretty boring, you know, some forms and stuff. And they said it was like watching Garrett do a Rubik's Cube over and over and over. Because he'd ask some questions and they'd answer, and then he'd. And then he'd ask one more question and he'd say, oh, well, that's different. You're Catholic. Oh, we gotta. We know we gotta do something else. And then he'd start over. He said it was wild. And I was like, see, it's exciting. Come be a transactional lawyer. We have fun.
[00:36:34] Speaker B: It's not boring. Oh, goodness.
[00:36:36] Speaker A: Law.
[00:36:37] Speaker B: And. And, like, I don't know, the study of the brain, like, is. To me, both of those two are fascinating because it feels like it's a never ending new thing every, every, all the time. It's always evolving and changing all the time.
[00:36:54] Speaker A: The law is always changing that, you know, even in. Even in Texas, every two years we get a fresh batch of hundreds and hundreds of new laws, you know, and. And so it's always changing. And. And the market's changing too, you know, in ag. You know what. What used to be the norm of what we do for an ag client is no longer the norm.
[00:37:11] Speaker B: Right.
[00:37:11] Speaker A: It's, you know, for example, a good one. There is all the digital stuff. You know, I don't just need to know what John Deere's or whatever that my guy owns. I also need to know all his logins and all his passwords and all his stuff, you know, that it just, it's constantly changing. And I, I love it and it's great, but I could talk forever on state and probate and I got a whole lot more. But anytime that we want to talk about that I'm more than happy to. And just know that your estate plan is something that's really important. I encourage everyone to have one. We tell everybody, even your kids going off to college, they're adults now, they need to have an estate plan. And it doesn't have to be anything wild or crazy, but they need something. And the last thing I'll mention, because it's going to be very important to add, because I know you got to go. But the. You're asking about Hot Topics in the States, the big, big one at the moment is the estate tax.
And after. After the election, we have no real clue how that's going to shake out. And here's the very short version of that. For those who don't know, there are three federal transfer taxes, probably more than that, but there's three that I care about, which is the gift tax, the estate tax, and the generation skipping transfer tax. And those three that Trinity put together is meant by the feds to capture any transfer of property from one person to the next. That's the goal. And the short version is we had the estate tax forever, and it used to be pretty low. So everybody paid the estate tax at one point for the most part. So what happened is people on the deathbed were like, well, I'll just give away all my stuff. So then when I. When I die here in 20 minutes, I don't know anything. I already gave it all to Tillery. She owns it, not me. And so the government said, well, we'll fix that. We'll just put in a gift tax. So now if you give away your stuff, you give away too much. We'll tax you. Okay. Well then they said, well, okay, I won't do that. I'll put it, like, in a trust. And that trust will be like, for my grandkids, I'm going to skip my kids, because they already have. And so I'll just skip a generation. And so then they. I won't pay the estate tax, and they won't pay the estate tax, and my grandkids don't have anything, so they'll be below the estate tax. So we're just going to put it off for decades and decades and decades. So the government said, well, we're not gonna let you do that either. You're skipping a generation. We're going to tax you when you do that, because what you're doing is you're putting off the estate tax. Shame on you. So now they've kind of blocked it in three spots. So those are the ones and the why this is big for AG is the 2017 tax cuts and Jobs act moved the estate tax limit from the statutory $5 million threshold up plus inflation. So it was a little higher than that because it moves with inflation up to, I think it said it's at like 11 million something at the time. So now with inflation, it's now at like 13 point some odd million. So in other words, if you have less than that amount when you die, you are not paying the estate tax. If you have more than that when you die, you are paying the estate tax. And there's ways to combine with your spouse and there's all these other loopholes and things, but that's the gist of it. And if that. The 2017 Tax Cuts and Jobs act, because how it was passed as a budget reconciliation matter in Congress. Those provisions expire at the end of this year, the December of 2025. So January 2026, that 13 some odd million figure automatically is going to revert back to 5 million plus inflation. And that's going to come out to about 7 million a person. So for ag people, that's important because you may not have $14 million worth of dirt, but you, you might have 7. I mean, you know, I'm down here by College Station right now, and like my Austin clients, for example, if they don't own a blade of grass in Travis county, they got $7 million worth.
[00:40:48] Speaker B: Exactly.
[00:40:49] Speaker A: So that's going to be a huge swath of people that are suddenly needing to plan for the estate tax. So that's the big one I'm telling everybody about. You need to keep an eye on what happens with the, the 2017 extension or whatever they're going to do in Congress and see how that goes. Because we don't know where it's going to land.
[00:41:06] Speaker B: Well, we can kind of guess, though.
[00:41:09] Speaker A: We can, we can get. I mean, the goal, I'll tell you the goal. Everyone's saying it out loud. The goal is to. Is to extend. Extend it. So keep it at the 13 some odd million plus inflation, which will make it almost 14 million probably for next year. That's the goal of at least one portion of Congress. The, the issue. And even, even on, even on. I'll even say I won't dive too far into politics, but even on the conservative side of the aisle, there is pushback against that for some reasons, because there are a lot of other very big initiatives of the NOW government that have to get paid for. So, for example, one that is in direct conflict is the immigration Policies that want to go into place, those will be very expensive. And so the discussion is, how are we paying for those? One way we can pay for those is by taxing big estates.
[00:41:59] Speaker B: And unfortunately that is, you know, if you're taxed on all the things that you own in your estate, I mean, like, what if. And this may be because, like a tractor. What. What is it? Stripper is in your. Like it's a million dollars.
[00:42:16] Speaker A: That's right. And then all the time, I tell people that all the time. And in fact, I, I literally just submitted an article giving a very brief summary of all these taxes and kind of what's going on to the American Aguilars. It's going to be in the newsletter this month because they need, they, frankly, they had to scratch the bottom of the barrel and they asked me to write something this month. But anyway, we were talking about exactly this. And I write in there and I say to clients, I'm like, listen, Capital E estate for like, Texas probate purposes, you and me down at the county courthouse is one thing. Capital E estate to the IRS is something totally different. And it essentially means everything you own, everything when you die, everything. So the big one people don't think about is life insurance. So, for example, I don't necessarily have a lot of money, but I have a decent life insurance policy because I gotta make sure my lab gets taken care of if I die.
So every dollar of that policy counts. So if you've got a five million dollar insurance policy, that's five million dollars toward the limit. And there's, there's lots of ways to deal with that. You can do stuff to make it not count legally, of course, and there's lots of things, but if you just went and got one, you know, at MetLife or whatever, that counts. So when I'm talking to ag people, I'm like, hey, all this farm equipment, all this dirt, your life insurance, that little retirement account you opened 20 years ago, those city bonds you got when they redid the high school and you bought some or whatever, all that, all that counts. And so I'm like, you're, you're pretty close. You know, I even talked to a sweet little lady down, down here just, just this week. Everyone on the phone's kind of like, oh, well, you know, we're really not that worried about it. I'm like, well, you might want to be worried about it because just a quick search, I'm finding about $8 million worth of stuff for her. And that's not even looking at her money. So does she have, like. I don't. That's just her dirt, so. I mean, she's close, so it. It'll catch a lot of people off guard, depending how that goes on the hill.
[00:44:09] Speaker B: Well, we'll see what happens, won't we?
[00:44:12] Speaker A: We shall see.
[00:44:14] Speaker B: Well, thanks, Garrett, for being here. This has been super interesting.
[00:44:17] Speaker A: Yeah, yeah. Thank you for having me. It was. It was an absolute blast. I'm always happy to do it. And just let me know.
[00:44:22] Speaker B: Okay. Maybe we can pick up on some of this other stuff on another episode. That would be really great.
[00:44:28] Speaker A: Yeah, you bet. The pro. The probate process of once someone's passed is interesting in Texas, to say the least.
[00:44:34] Speaker B: Yeah. Yeah. Okay. Sounds great. Well, Garrett, thanks again. And friends, thanks for joining us on another episode of Conservation Stories. And if you found this episode interesting or other episodes have been helpful to you, would you please take the time to just review?
Just give us a five star review. That would be so nice of you and it would be so helpful. It's just like giving a contribution. It's so easy. Appreciate it. You're listening. And we look forward to being with you again on another episode.
