February 24, 2023
by Evin Bachelor
One of the most common estate planning questions is, “Do I need a trust?”
Farm succession planning attorneys have a variety of tools to choose from when advising a client on their estate planning needs. So, if the first question is, “Do I need a trust?” my response is almost always, “It depends.”
Most of the conversation time should center on family goals, dynamics, needs and assets. These factors are what should drive your estate planning decisions. To be clear, not all farm succession plans require a trust.
For some farm families, a trust is the best solution to achieve their farm succession plan because of the different ways an attorney can customize a trust. Trusts are useful for family situations such as:
equitable balancing of inheritances between on-farm and off-farm heirs
buyouts of operating or other assets
managing assets for heirs with disabilities, addiction, creditors, difficult personalities or bad spending habits
managing assets for young and minor children
estate tax management
Simpler estate plans may only require transfer-on-death and pay-on-death beneficiary designations reinforced by a will. These TOD and POD beneficiary designations name specific beneficiaries to receive your assets outright, with no strings attached.
When a client knows the beneficiary of a specific asset, this simple plan may be good. After you die, the beneficiary presents your death certificate to the agency or company, fills out some paperwork, and the asset transfers to that beneficiary directly and outside of probate.
However, a TOD or POD beneficiary is not good in every case.
For example, a TOD or POD to a minor child means he or she will receive that asset and have full, unlimited control upon turning 18. Most parents of young children tell me they want assets managed for their children until at least 21 or 25. A TOD or POD to a minor is no strings attached at 18.
As another example, pretend Mom and Dad left the farm to four siblings in their personal names. The four siblings now want to sell the farm, and none of them can afford to buy out the others. Unfortunately, if a deal can’t be struck, the farm may have to be sold.
After the first conversation with a new client, I am usually in a position to recommend a trust plan or a will-based plan with beneficiary designations. In your first meeting with legal counsel, they should be able to formulate an opinion on using a trust if your goals call for it.
Bachelor is an attorney with Wright and Moore Law, based in Delaware, Ohio. Contact him at [email protected] or 740-990-0750 or visit ohiofarmlaw.com.
Read more about:Farm Succession
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