October 13, 2017
I have met with a number of farmers over the past few months and am hearing a common question: Should we bother making an estate plan now, when there is so much uncertainty?
My answer is generally yes, it is best to make a plan now despite the uncertainty of the future. Whether the uncertainty is caused by changing land values, loss of income, family circumstances or new tax law proposals, it is advisable to establish a plan based on the circumstances today — with the understanding that changes and updates may need to be made in the future.
Your estate plan should address your current needs and focus on the following foundational estate plan priorities:
• Provide for you and your spouse.
• Provide for your children.
• Protect your assets.
• Grow your wealth.
• Address tax issues.
By focusing on these key points, you will build the foundation of an estate plan that will have the flexibility to deal with changes during your lifetime.
Protecting your autonomy by providing for yourself and your spouse should be the first priority of your estate plan. Your autonomy is reflected in the control you retain over assets and decisions while you are alive and well, and the power to appoint those who will make decisions for you if you become incapable due to incapacity or death.
Addressing the present needs of your children is particularly important if you have minor children. Your plan should address who will take care of minor children in the event of incapacity and death, and how assets will be distributed to your children. Upon the death of you and your spouse, you may decide to have a common-pot trust hold your assets until your youngest child reaches a certain age. This delays the split of assets among the children until your youngest reaches that age. This allows all children the opportunity to benefit from the assets equally while they are young. When assets are later split out among the children, the assets can be distributed to them outright or into separate trust shares.
If trusts are used, provisions can be made that protect the children in the event of their divorce, bankruptcy or litigation. Even if you do not have minor children, it is still advisable to make a plan for the distribution of your assets upon your death to avoid difficulties and confusion in the administration of your estate.
For a farm family, distribution plans may vary greatly, depending on whether children or grandchildren will continue farming. If it is unknown if a child or grandchild will be farming, it is advisable to make a estate plan with a general provision that provides access to farmland, equipment and farm buildings to a child, grandchild or other relative who is actively farming. This provision can be revised later, when it becomes clearer who will continue the farm operation. Having a general provision will help protect the continuity of the farm operation even if it is not certain who will be farming in the future.
Finally, it is advisable to review your estate plan on a regular basis, and especially at times when you have family or financial changes. Making changes to your estate plan is simple to do, either by executing a codicil to your will or making an amendment or restatement to your revocable living trust. You will likely find it is best to work with an estate planning professional who has a system in place for reviewing and updating your estate plan.
Regardless of the uncertainty of the future, it is advisable that you make a plan now that covers your current needs and risks.
Balzarini is an attorney at law with Miller Legal Strategic Planning Centers P.A. in Rochester. Contact him at [email protected].
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