April 03, 2018
All of us recognize the importance of planning and doing the right thing. Approximately 65% of all people who die do not have a Will. When one is blessed with a successful farming operation, proper planning is even more important.
When transition, estate and retirement planning is done the following should be discussed:
1. Wills - What would happen to your property when you pass? Especially important is who would carry on the farm, what do you want as inheritance to go to your children, and how do you want your surviving spouse to have an income stream for the rest of his or her days?
Typically in a farming situation when you have a farming child back at the farm, we spend a lot of time talking about “fair vs. equal.” Equal is when you have three children and everything is divided three ways. Fair is a broader view and comes from the concept that the farming child has helped the folks succeed and prosper, while the other child or children have left the farm to make their own money and equity from non-farming positions. Yet there is still all the love and respect of that child or children. The parents that think ‘fair’ tend to leave (in their will) more of the ag-related assets to their farming child and more of their non-ag assets to their non-farming children. These are always difficult concerns because, as parents, we always never want to try to pick a favorite child. It’s important to know, however, that the farming child is going to have enough capital and enough size and scale to the operation to be able to succeed after the passing of the parents.
2. Durable Powers of Attorney - This is a power that is typically given to one’s spouse. It is the right to sign legal papers and financial documents. As an example, let’s say Dad has a stroke and the tax return is still due. This power would give Mom the legal authority to sign the tax return or sign a cash rent contract renting their land out to the farming child, etc.
3. Health Care Directives & Living Will - This gives somebody the ability to make health decisions for you when you are not able. For example, let’s say somebody had a car accident and is unconscious. It gives the person the right to make medical decisions for the injured person. Once the injured person is fully conscious and capable, then he or she can resume making their own decisions regarding medical care. A Living Will is a document where you direct if you want or do not want extraordinary measures taken when you are in a terminal condition. These documents vary based on state law.
These types of documents need a lot of thought and decision-making on how to divide things and who to appoint certain powers to. We recommend working with an AgCountry Consultant to help guide you through these decisions.