Preventing a legal mistake is cheaper than fixing one

Richard Drury/Getty Images Person signing contract
READ BEFORE SIGNING: Most of the time, it is important to actually read a contract you are signing, even if you are having an attorney review it for you. Make sure you understand the key terms. If a term of the contract is confusing, have it reworded.
Legal Matters: Here are the most common legal mistakes farm families make.

Over the years, I have seen too many farm families make the same mistakes. Here are some of the most common ones:

Mistrusting siblings. A common approach by parents in drafting estate plans is that they will leave one child in charge of their affairs upon death or if they are ever incompetent. Often, the other siblings think that the sibling in charge is doing something wrong. Many times, that belief is unfounded — though not always. If you are the sibling serving in the role, make the effort to continually keep your siblings apprised of what is going on. For most people, sending an email to your siblings does not take much effort. Parents can also consider having two or more children serve in those roles so there is less chance for one sibling to do something crooked.

No estate plan. Speaking of estate plans, a common mistake is not having one. At some point in each of our lives, we will have to face the fact that we are mortal. For most people, avoiding probate is an important goal of an estate plan. Estate plans are also more important in second marriage situations or when one child is taking over the farm but not the other children.

Estate plans should always include powers of attorney, of which there are two basic types: One type is to appoint someone to have the authority to make a health care decision for you if you are incapacitated, and the other is to appoint someone to have the authority to make a financial decision for you if you are incompetent. Without these powers of attorney, and if something happens to you, you will have to go through an expensive, and I would argue invasive, court process to have a guardian appointed for you.

Not reading contracts. Honestly, there are times that not every word needs to be read before signing a contract. One example might be when you are signing loan documents, but even then, it is still important to understand all the main terms. However, most of the time, it is important to actually read a contract you are signing, even if you are having an attorney review it for you. You should make sure you understand the key terms. If a term of the contract is confusing, you should have it reworded. If the other party is pressuring you to sign a contract quickly, that is probably a good sign you should stop and read it first.

Not putting contracts in writing. Verbal contracts, in most cases, can be legally binding, though there can be questions as to what exactly was agreed to unless there was an impartial and unbiased witness. If you are hiring a contractor to do work on your house, many problems can be avoided if a description of the work the contractor is going to do and the price for that work is put in writing first.

Another issue is putting contracts in writing but doing a poor job of it. One example of this that I see is relying on the seller’s real estate agent to draft the offer to purchase. First, it is always important to remember that the agent listing the property for sale is working for the seller. Second, I have seen too many situations where after the offer is signed, the buyer wants to add stipulations but cannot because the offer is already signed. Keep negotiating until the terms you want in a contract are the offer.

No title search. Whether you are buying 200 acres of land or a sliver from your neighbor, it is always important to have a title search done. It might seem obvious to have a title search done on a large purchase, but when you are buying a sliver of land, it can be just as important. If the neighbor you are buying land from has a mortgage, you need to get that mortgage partially released from that sliver, or your neighbor’s mortgage will become your problem, too.

In most of these cases, these mistakes can be fixed. However, the attorney fee to fix a mistake is usually much higher than the attorney bill to prevent the mistake!

Halbach is a partner in the agricultural law firm of Twohig, Rietbrock, Schneider and Halbach. Call him at 920-849-4999.

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