Leaving a legacy for future generations
Many farmers, ranchers and landowners want to preserve the family farm and their way of life after their death. Often it is the idea of leaving a legacy to children and grandchildren that is important. Some landowners want to keep the land from being developed into a suburban neighborhood, shopping mall or parking lot in the future. Others may have children or family members that make their living working on the farm and it is important that they are able to continue the farming operation after the death or disability of the principal owner. In all of these situations, it is very important to have a plan, keep the plan updated, stay aware of tax law changes and gather a team of professionals to help reach the desired outcome.
Estate planning for a farm family should include planning for the death of the primary owner(s), but also for a situation in which the owners would become mentally or physically incapacitated. The plan may require tough decisions to be made such as who inherits the land, livestock, farm equipment and other assets. These can be difficult decisions to make and sometimes people choose to avoid them completely. Other people may work with professionals to get an estate plan put in place, but fail to revisit the plan when life circumstances change. Life changing events happen – marriage, divorce, births, deaths, illnesses, bankruptcies, lawsuits, job changes, and relocations. In addition, there are often changes in the tax laws that effect an estate plan. When these changes take place, the estate plan needs to be reviewed to make sure it still works for all parties involved.
Farmers and landowners should also pay close attention to changing estate tax legislation as well as current land values.
Many times landowners use beneficiary designations such as Payable on Death (POD), Transfer on Death (TOD) or beneficiary deeds. Others add family members as joint owners of their assets. Doing this can sometimes result in unintended owners, unequal inheritances and family quarrels. In addition, outright distributions may not be protected from creditors, divorce or lawsuits. Using business entities such as corporations, partnerships, limited liability companies may offer better protection for the owners during their lifetime and allow them more control in addition to less liability exposure.
Farmers and landowners should also pay close attention to changing estate tax legislation as well as current land values. Some owners do not consider the effect of probate fees and estate taxes on the value of their assets at death. Everyone has heard the horror stories of family farms being sold off so the heirs could pay the taxes that were due. Fortunately, many farmers today are not affected by estate taxes, but it is important to be aware of the current exemption amounts and have a plan to pay those expenses if one has an estate that could possibly be exposed to these liabilities.
Working with a solid team of professionals to develop, implement and monitor a plan is so important and oftentimes overlooked. A team should include an estate planning attorney, accountant, insurance professional and perhaps a corporate trustee.
Andrea McKinney, Vice President & Wealth Management Advisor at Central Trust. She maybe reached at 417-569-1601 or by email at [email protected]