Farmers’ Biggest Estate Planning Mistakes
Farmers know their profession entails a lot more than making a living; it's also about passing on a way of life; a family legacy, if you will.
Unfortunately, too often farmers fail to keep their estate plan up to date, and in doing so they place their legacy at serious risk. An outdated or inadequate estate plan can sometimes put their property, which is often the key to their legacy, up for sale, resulting many times in the property being converted to a non-agricultural use, effectively cutting your family's legacy off at the knees. If you're lucky, your heirs may be able to cut a deal to put the family name on the subdivision, but that's unlikely to be the legacy you envisioned.
That is probably the biggest mistake farmers and ranchers make with their estate plan; their needs are very complex, and they too often fail to make a proper plan to meet their desire for a family legacy, or they forget to update their complex plan on a regular basis, and allow it to become something that is less useful.
If you have children or other relatives who are interested in continuing the family business, and others who have no interest at all, your estate plan should reflect that; don't make them choose who gets to inherit the pieces, like the land, the livestock and other assets; create an estate plan that takes everything into account.
Just as important is to constantly maintain and tweak the estate plan to reflect life changes. For example, if the heir who wanted to keep the family farm alive at one time changes their mind or 2-3 grandchildren change their minds and want to keep the farm alive, change your estate plan to reflect that. Assemble a team of estate planning experts (or let us assemble a team for you), and create a plan that will make everyone happy based on your current situation, but then revisit the plan every few years after that, and account for changes in the family dynamics, and tweak accordingly.
Another mistake farmers and ranchers make quite often is to plan the easy way and try to avoid probate by holding property jointly with family members and establishing payable on death (POD) or transfer on death (TOD) accounts and to name certain family members as beneficiaries on life insurance policies and retirement accounts. While this seems like the easy way out, it can actually become a huge mistake.
For one thing, if the jointly-owned property is enrolled in programs administered by the U.S. Department of Agriculture, many subsidies may end u being left on the table. Also, the owners of these properties are actually giving up a measure of control of their real estate by sharing joint ownership with others.
A better idea for maximizing subsidies and making sure the right people inherit your property and carry on your legacy is through either creating business entities or trusts. In doing it that way, you also maintain more control.
Farmers and ranchers who wish to preserve their family's legacy should absolutely speak to an expert to discuss their unique situation and address heir specialized estate planning needs.
