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Sewing the Seeds for a Successful Farm Transition?

Succession planning is one of the most important aspects of passing on a farm to future generations, but having a conversation about it is not always easy. Jolene Brown, an Iowa farmer and professional speaker, and Nelson Schoon, certified financial planner and owner of Financial Framing, weighed in on some of the do’s and don’ts of succession planning.

AgriNews recently reported some great advice about what to do (and not do!) to ensure a smooth transition of your farm to the next generation or a new owner in “Do’s and don’ts of farm succession planning.”

DO make a plan. Farm succession is critical. It’s nice when you have trusts and wills, however, when you’re dealing with transferring a business such as a farm, there’s a lot more complexity. The majority of farmers are over the age 55, and if you can believe it, 80% of them do not have a plan.

DO hire the right people in the right positions. Like any closely held or small business, the fact that you’re related to someone doesn’t automatically mean they should be working on your farm. You may have some good workers who are members of your family, but all of your farmhands should be vetted and hired correctly.

DON’T wait. Unfortunately, some farmers pass at an early age and have no plan in place. This can create major problems for family members. Contact a skilled estate planning attorney right away to help you make a plan.

DO communicate. Ask yourself whether you want the farm to continue. If so, you need to communicate your expectations clearly so that the plan is known. Families need to have a legal estate and management transfer plan or a buy or sell agreement prepared. All of the concerned parties need to discuss details that go beyond the will.

DO make sure there’s enough money. It’s not that you need to have a super-prosperous farm ready for someone to take over. The next generation needs to be prepared with a business plan of how they will be adding value if they join the farm.

DO get it in writing. Remember that a conversation or phone call isn’t a binding legal contract. Work with your estate planning attorney. He or she will make sure that everything is legal and above board.

Reference: AgriNews (September 17, 2015) “Do’s and don’ts of farm succession planning”

Is the Family Business a Part of Your Estate Plan?

Family business contributes to over 70 percent of global productions, but owners of them don't update their estate planning. It's estimated that over 50 percent of family business owners didn't update their estate planning documents for more than five years. Perfect and updated family planning ensures the smooth transition of a property from one generation to other while exploiting many tax benefits as well.

A recent article in Money Times, “Updating estate plans need of the hour for family business owners,” warns that estate planning becomes old or outdated after just a few years. In addition, family situations and relationships between family members, business matters, net worth, and other factors can and will change anytime or over a period of time.

That’s why you need to have an estate plan review on a regular basis. Regardless how complex an estate plan is, it's better to work on a customized estate plan now. This will make certain that your family business passes from one generation to the next without disputes that may further damage its possible growth. In the alternative, estate planning can also be used to offload the family business at a fair price deal.

Many family business owners aren’t aware of charitable planning and charitable gifts. More than 50% of family business owners aren’t exploring these options and their tax benefits.

Because the tax laws change frequently, family business owners need to work with their estate planning attorneys and take advantage of any new strategies to legally avoid estate taxes, gift taxes and other taxes.

After speaking with an attorney, some family business owners find that they're richer than they thought once their estate plan is drawn up. Estate planning is critical for the inheritance to control the assets and minimize the tax imposed by both your state and the federal government.

If you are now motivated to talk with an attorney about  placing your business in the best possible condition when you pass it to the next generation, please set up a consultation before the motivation fades.

Reference: Money Times (September 18, 2015) “Updating estate plans need of the hour for family business owners”

Should A Revocable Trust be Your Estate Planning Choice?

If you haven't considered using a revocable trust rather than a will as your main estate planning document, you could be making a critical mistake.

A recent MoneyWatch article, “5 reasons you need a trust, not a will,” lists five reasons for using a revocable trust as the primary method for disposing your estate.

1. Pass on assets privately, quickly and efficiently. A revocable trust as a vehicle to distribute your estate allows your beneficiaries some privacy. The trust isn't filed with the probate court and isn't a public document (unlike a will). Property transferred into a revocable trust during your lifetime isn't subject to the expense and delays of probate.

2. Preserve assets for heirs and charities. Changes can be made to your revocable trust anytime. However, when you pass away, the trust becomes irrevocable. The provisions that pertain to the disposition of assets to your heirs and charities will be administered by your trustee under the trust’s terms.

3. Assets that remain in your trust after your death typically aren’t considered marital property. Those assets aren't subject to division in a settlement if the beneficiary gets divorced. However, in many states, a divorce court may take the beneficiary's income interest into consideration when determining the division of marital property or support obligations.  (If this is a concern to you, let's talk about FL law.)

4. Retain control over distributions. A trust can contain language that says when distributions of income and principal will be available to beneficiaries, and it can have distributions for specific purposes like education or health care expenses. A trust can also include language for distributions based on attaining specific ages. For example, one-third of the principal is distributed at age 30, half at 35 and the rest at 40.

5. Distribute retirement accounts efficiently. If the trust is the beneficiary of your retirement accounts and if it is written correctly, the trustee can limit withdrawals to the retirement account's minimum required distributions based on the life expectancy of the oldest beneficiary. This avoids the mistake of a beneficiary liquidating a retirement account and triggering a large income tax obligation.

Please make an appointment to discuss if this strategy will work for your specific circumstances.

Reference: MoneyWatch (September 17, 2015) “5 reasons you need a trust, not a will”

Who Handles Everyday Life When I'm Not Around?

Who pays the bills in your house? If your house is like most, there is probably one person who handles most of the financial matters. Would you or your spouse be prepared to assume the role of managing the household finances if something happened to the other spouse? Too often, clients have gone through the process of ensuring their estate plan is in order, just to realize that, when one passes away, the other does not have the information they need to pick up where the other left off. After the wills, power of attorneys, and medical directives are created and the other crucial estate planning components are addressed, take some time to consider your unique family situation and the details that would make the transition more difficult to navigate following a death.

A recent issue of The Ledger contained a very practical checklist for organizing household finances in “Estate planning details you may be forgetting.”It included these important points:

1. Organize financial documents and personal information. Leaving behind organized records with everything from account information to contact numbers will help your spouse or children when they need access to this information. Make certain your spouse knows where you keep things such as wills, trust documents, insurance information, social security cards, birth certificates, medical records, and tax information. Write the names and contact information of emergency contacts and include your doctors, attorney, and insurance agent.

2. Create a list of assets and liabilities. Assets should include bank accounts, brokerage accounts, safety deposit boxes, and property. Liabilities should include things like credit card debts, mortgages, and car payments. List the location, names on the accounts, account numbers, and any website login information including usernames, passwords, and security questions for each one.

3. Identify all sources of income and expenses. This will help your spouse understand what in-flows to expect, as well the bills to be paid. Note whether you pay a bill by paper or online, and if online, list the usernames, passwords, and security information to access the websites.

4. Document any other miscellaneous information that your spouse might need. While this might not be financial planning, it is still very important. This includes things like where you keep the spare keys to your house, or any keys to the shed or safes. As you go through your daily routine, consider things that are obvious to you, but may not be as obvious to your spouse or children. This should include a list of passwords for online accounts, passwords for computers and other electronic devices, locations of flash drives or CDs with old family pictures—even a basic household maintenance checklist.

Detailed planning will result in the peace of mind for your spouse and family in the event of your death or incapacitation.

I'd be happy to sit down with you and your loved ones and help with planning for these and other life events.  Please visit my website for more information or to set an appointment.

Reference: The Ledger (September 17, 2015) “Estate planning details you may be forgetting”