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Late start reduces yield in estate planning, too

Estate Plan Edge: A late planting season may lead to lower crop yields. In estate planning, procrastinating can also prevent optimal results.

Rain and cool temperatures have delayed planting in much of the Corn Belt. The impact of planting date on corn yields has been widely studied, and the general consensus is that corn planted later yields less. You can’t help it, obviously. You act prudently under the circumstances, but you can’t change the weather.

There are a lot of areas in life where a late start will result in poorer performance. If a runner doesn’t get off the blocks as quickly as her competitors, she probably won’t win the race. If you don’t leave on time, you’ll probably be late for church. If I don’t save money or pay down my mortgage as early as someone else, I won’t have as much to retire on as they do.

Estate planning can be like this. When someone asks me, “When do I need to finish my estate plan?” I respond with a smile and say, “No later than the day before you die … so what day will that be?”

If what you would leave your family — the value of your savings, your land, your equipment, your vehicles, your life insurance proceeds — is enough to make a noticeable difference in their lives, you should start estate planning as soon as possible. This is true no matter how old you are, how many children you have, how simple you think your life is, or how healthy you feel.

Why as soon as possible?

We never know when we are going to die. Some people say, “I plan to give that away before I die, so I don’t need to address that in my will or living trust.” That is a gamble, not a plan! Five retirement-aged individuals died instantly in one traffic accident on Interstate 57 last week. Tragic. But we all know people who die unexpectedly.

We also never know when we might become disabled. Dementia can come on before you realize it. A stroke or head injury happens without warning. Estate planning includes having the plan for what your family will do with you and your estate while you are disabled. But they can’t update your will. Your plan for distribution of your estate on death is largely set in stone at the time you become disabled.

What about your estate tax plan, the plan to keep the land in the family and your plan to protect your successor? You know, that plan you’ve been developing in your mind? If you didn’t have it on paper before your stroke, no one would be able to implement it because you put it off a little too long.

Maybe you are putting off meeting with the estate planning attorney because you are trying to get rid of as many assets as you can first. One common mistake we see is the family who sets up the corporation or limited liability company, puts their land in it, and starts giving away shares. It is good to be proactive, but this particular approach often undermines estate planning and quickly creates roadblocks to better options.

Instinct tells you that succession planning comes before estate planning. Get rid of the machinery before you draw up the estate plan, perhaps? Retire, and bite the bullet on the final years’ crushing income tax? You really should develop the overall estate distribution plan first. You might be using up your estate tax exemption inefficiently. You may be robbing your successor of a large income tax write-off. You could even be engaged, unwittingly perhaps, in tax evasion that will come back to bite your heirs.

Let time be your friend

If you focus too much on saving income taxes this year and put off estate planning, you are probably creating a much greater problem for the future. If you hastily give property away “to get it out of your estate,” you may saddle your family with serious income or capital gain taxes later.

Some of your best estate planning options will also help make your succession and retirement plans go more smoothly and can save a lot of income taxes. Some estate planning strategies take years to implement effectively. Some estate tax reduction strategies are most effective if you start while you are still actively working.

Some things are beyond your control — like the planting schedule. But planning to make sure that what you have goes the way you want to the people you love? That is within your control. Let time be your friend. Start early for the best results.

Ferguson is an attorney who owns The Estate Planning Center in Salem, Ill. Learn more at thefarmersestateplanningattorneys.com

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