Sadly, weeks after the Nov. 3 election, there remains considerable uncertainty about the outcome. Even after the legal wrangling over the presidential election, we won’t know entirely the makeup of our federal government until after the Jan. 5 Senate runoff elections in Georgia.
Does this uncertainty cause you stress relative to your business? If so, why do you think that is?
If you were proactively involved in estate planning, you would feel much less stress. Not because you had necessarily solved all possible estate taxes even under newly elected tax-raising politicians, but because you have a foundation on which to build.
Too many farmers stick their heads in the sand, thinking that someday the politicians are going to remove all need for estate planning. Wouldn’t that be grand? If you could just wish away the need, avoid attorneys and save a few bucks in planning fees? If you are thinking that way, you probably are in the common trap of assuming that estate taxes are the only reason to plan. In fact, there are plenty of other reasons that may actually be more important than taxes, at least in the long run.
Your farm’s future should not be subject to the whims of politicians. You need to get away from thinking you are at their mercy, because if you are counting on them to solve your “tax problem,” you will remain uncertain and stressed. You will go to your grave and never have peace of mind! Furthermore, the longer you assume that planning is only about those uncertain taxes, the closer you get to dying without addressing all of the truly important reasons for planning.
Estate planning is a process, not a purchase. It is a system, not a document. It is a commitment, not a transaction. When you embark on the planning process, you put time, effort and a reasonable amount of money into creating a plan based on the best information available to you today. With the help of counseling-oriented professionals who help you think of everything, you develop a plan that weighs various risks and aims for the highest possible goals.
Tax risks include estate, gift, capital gain, income and self-employment taxes. These are the risks most susceptible to political winds. Non-tax risks include economic risks, management decision-making control risks (succession), catastrophic creditor risks (lawsuits), family risks (divorce) and health risks (nursing home). All of this must be considered in context of the highest goals: How can you fairly divide and distribute your estate, and will your loved ones be bonded together or driven apart as a result?
Once you create that plan, it is obviously written down in legally enforceable documents. You can then have peace of mind that if you become disabled or die today, you’ve done a great job, and your family will get a great result. But those documents are more of a placeholder than a finish line. You probably won’t die today.
Then you and your professionals watch for changes — not just changes in the law, but changes in your circumstances, in your family, in the farming economy, in your health. You watch all of the risk factors.
Under a new administration, are estate taxes becoming more of a risk? Is a child’s marriage on the rocks? Have income taxes taken a turn for the worse? Has the probable successor decided that farming just isn’t his cup of tea?
With a great underlying plan in place, some changes can be addressed with simple word processing updates. Other changes might require significant realignment of assets. Sometimes you will need to seek counsel and advice to deal with new possibilities, while in other cases you can just tell your attorney what you want to change.
So did this election stress you out? Do you even have the placeholder in place? Do you have a relationship with trusted advisers, in which they commit to helping you stay current with the law and you commit to keeping them informed of changes in the family? If so, you can look at uncertainty like the 2020 election results with a much more ho-hum attitude. Change is a nuisance at times, but with a foundation properly laid, it need not be a crisis, or even a cause for serious stress.
Ferguson is an attorney who owns The Estate Planning Center in Salem, Ill. Learn more at thefarmersestateplanningattorneys.com. The opinions of this writer are not necessarily those of Farm Progress/Informa.