One of the questions we get the most involves estate planning—and for good reason. Estate planning, or the lack there-of, is one of the top issues that many farmers and landowners face. It should go without saying that every farm operation should have a plan in place, because the problems associated with poor planning can not only jeopardize the farm operation itself, but relationships as well. Estate planning doesn’t have to hurt: here are some ways to get it done, and done right.
Why do so many farmers and landowners resist creating a plan in the first place? Some say that the plan is known and agreed upon already by family members, or those engaged in farming. This is a major assumption, and many families have been surprised by what they “knew” and “agreed upon” when the issue finally comes up. Others have a plan drafted, but have failed to re-visit the plan for years, often amidst greatly different laws or circumstances. Yet others assert their plan to simply divide the estate equally among their children. While this sounds easy and fair, it often creates problems among farm and non-farm offspring, and often ends in a farm/land sale.
Obviously, this should be avoided at all costs. One thing that is in general agreement is for the land and assets to provide a living for future generations, and to prosper for the long-run. The main goals of any plan are to:
a) Transfer ownership to the intended party with as few complications as possible.
b) Avoid costly estate taxes, usually done with the help of a land manager, lawyer, and accountant who are well-versed in estate planning.
c) Ensure a secure financial future for the following generation. This often means setting up a plan so that the estate pays for retirement costs, funeral costs, or the costs associated with settling the estate—and not the beneficiaries themselves.
d) Develop the management skills of the estate’s beneficiaries in a way that is agreeable to all parties involved. A properly planned estate will set up an ownership and transfer method that suits the needs and timetable of both generations.
e) Keep the land in agriculture if so desired.
To get started, set your goals—what main things do you want your plan to address? This can range from ensuring a solid retirement, caring for a spouse, to setting up who will take charge of the land and farm after death.
Next, determine your financial worth by verifying both your personal and business assets. This is best done by enlisting the aid of an accountant and a lawyer. They know what information is needed for an accurate assessment of the estate’s worth.
Determine what type of legal ownership and business structure you have already. Are you a sole proprietorship or a limited proprietorship? A Corporation or an LLC? It is necessary to know this before moving forward with your estate plan.
Once you have completed these initial steps, you are now in a position to put a solid estate plan down on paper with your team of consultants. Don’t wait—the costs of putting a plan together are small in comparison with failing to have a plan in place when it is too late.
Do you have questions about your estate plan? Don’t jeopardize your land asset—contact a UFARM representative with concerns—we are glad to help. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!
Source consulted: Cowee, Margaret, and Kynda Curtis. “Key Concepts and Steps in Agricultural Estate Planning.” University of Nevada Cooperative Extension. University of Nevada. Web. 24 Nov. 2014.