If it turns out that the next generation of a family with a farm wants to work it, you have a good start at succession. However, you will also need an estate plan to tackle that job, according to Lancaster Farming in “Estate Planning Important to Succession.”
In order to carry out the succession plan successfully, it is likely you will need all or at least some of the following: guardianship for minor children, beneficiary designations, financial power of attorney for business, a health care proxy, a will and possibly a trust and life insurance.
While this may seem like a lot, an estate planning attorney can guide you through the process. However, you will also need to pass all of the information on to the next generation.
How can you structure the business in order to bring in multiple generations so the farm can continue to support more than one generation? Without an estate plan in place, the state law generally divides assets, which may require the sale of the family farm. The law does not consider whether members of a family farm are contemplating a divorce or who might have estranged children or parents.
Working with an estate planning attorney who has experience with multi-generational farm families can help bring issues to the forefront and resolve them through a carefully created estate plan. If the will needs to be amended or reviewed in the future, that can be done either by creating a new estate plan or drafting a codicil to amend the will.
Note that one cannot simply make notes in the margins and expect them to be considered valid by the court. Any changes must follow the procedures of the state. That means having the changes made properly, with the help of an attorney.
Assets outside of the will can include life insurance policies and payable on death (POD) bank accounts, where a beneficiary has been named. Joint bank accounts and any jointly owned property held with rights of survivorship are also outside of the will.
For some farm families, a trust can be a valuable estate planning tool. With federal estate exemptions now at record highs ($11.4 million for individuals, $22.8 million for couples), trusts are more likely to be used to protect a disabled family member from losing their eligibility for government benefits (Special Needs Trusts) or for family members who cannot manage their finances on their own.
Wills provide several advantages in succession planning, including control of the property until death, control over who inherits the property, naming a person to be the executor of the estate and naming guardians for minor children.
A living trust eliminates the need for probate and your information remains private. This makes it more challenging to contest. The trust can also hold assets for minors. However, a living trust may have trustee fees and adds a layer of complexity to asset management.
A durable power of attorney appoints a person to act as an agent for all business and financial matters. The authority can have limits; it can be revoked when you want, or, in some states, it can be written to be active only during a certain time frame, like when you are undergoing surgery.
A health care proxy is the appointment of an agent to make health decisions on your behalf if you become incapacitated and cannot communicate your wishes. It is essential that you provide your health care agent or agents with specific instructions about what you do and do not wish to happen when you are facing possible end of life decisions. This may include intubation, artificial respiration, a feeding tube and other means of prolonging life as well as the decision to refuse such measures.
An estate planning attorney can advise you in creating an estate plan that fits your specific circumstances.
Reference: Lancaster Farming (April 20,2019) “Estate Planning Important to Succession”