Estate planning is important for all families and business owners, but it is crucial for farm families. A solid basic estate plan serves as the foundation for a farm succession plan. Estate planning isn’t for someone older or someone richer; it’s for you.
To start, put in place your “not dead yet documents.” These can range from a general durable power of attorney to a living will to a trust. These documents are vital to create a complete plan and prevent unneeded stress on your family members. Plan to meet your goals as they are today. Then, dust off the plan every five years or so (or if there is a change in assets, relationships or the law) to make sure your plan still achieves those goals.
Power of attorney: To sign a power of attorney means you give someone else the authority to act on your behalf in the event you become incapacitated, or you can choose to give someone authority to act on your behalf the moment you sign the document, for convenience purposes. You might also wish to have two separate powers of attorney—one giving authority to a business partner to make decisions concerning your farm operation and one naming a spouse or family member to handle your personal finances.
It’s also important to sign a document setting the order of priority among the family members you would want to make your healthcare decisions if you become unable to speak to your doctor and make your own decisions.
Living will declaration: This document states your intent that under certain circumstances you wish for medical procedures to be withheld or withdrawn, and you wish to be permitted to die naturally with only medication and procedures necessary to provide comfort and alleviate pain. Signing a living will can help take the burden off of your family members’ shoulders if they have to make a difficult end-of-life decision for you.
Life prolonging procedures declaration: The exact opposite of a living will, this document states your intent for your healthcare providers to use and continue all life-prolonging procedures that could possibly extend your life. It is more important, however, to sign the legal document setting the priority among your family members who have the authority to make your healthcare decisions.
Health Insurance Portability and Accountability Act (HIPAA) release: Any time someone must deal with your otherwise private medical records, it is important HIPAA release language is included, authorizing your representative to have access to your medical records. That way, there is no red tape if the time comes for someone to stand in your shoes to make healthcare decisions.
Will: If you die without a will, the “intestacy” laws of your state will dictate where your property goes. For example, if you are married, your state’s laws of intestacy might provide that half of your property goes to your spouse and half goes to your children. Without a will, minor children inherit at the age of 18, after the expiration of their Court Appointed Guardianship. Without a will you have expressed no preference as to who serves as personal representative or executor, and your farm, just like any other asset, is divided equally among those who take under your intestacy statute.
Some property is not governed by a will. Property titled as joint tenants with rights of survivorship or tenancy by the entirety automatically pass to the surviving joint owner. Life insurance proceeds, qualified retirement assets, annuities and similar contract-based assets pass according to the terms of their beneficiary designations. It is important to review and update these designations as a part of your comprehensive estate plan.
Trust: A trust is useful when you don’t trust someone. Some folks have grown children with dependency problems, money-handling problems or bad marriages. Therefore, they might wish to spread out distributions to the child rather than leaving one lump sum after death. Those in a second marriage with children from a previous relationship might want to ensure their assets are preserved for ultimate distribution to their children, while making sure their spouse has access to the income and principal from the trust to support his or her lifestyle. If you don’t want a beneficiary to inherit his or her share of your estateimmediately, then such share can be held in trust.
A trust inside your will is called a testamentary trust. A revocable trust is a separate document that can be
created during your lifetime and might avoid the need for probate administration in one or more states. A trust separates control of assets from the beneficial interest in the assets. Your trust might assert that income and principal distributions can be made to your named beneficiaries for specific purposes, including health, education and general support. The assets are still there for the beneficiary’s use and enjoyment; however, there is a gatekeeper in charge of making sure the distributions are only made for purposes that you approved.
Attorney Polly Dobbs specializes in estate and succession planning. As part of a seven-generation farm family, she knows the unique issues facing farmers. Contact her at email@example.com.
Make Your Succession Plan a Priority
Put your succession plans into action this winter. To learn more or register, visit http://www.FarmJournalLegacyProject.com or call (877) 482-7203.
Farm Journal Legacy Conference
Dec. 2-3 in Kansas City, Mo.
Take time to attend this two-day event packed with information and tips for succession planning. A wide range of experts will be on hand to share insights and answer questions.
Farm Journal Legacy Project Workshops
Dec. 8 in Greenville, Miss.
Dec. 10 in Oklahoma City, Okla.
Dec. 12 in Garden City, Kan.
Use these workshops to kick-start your farm’s succession planning.