Despite popular belief, the succession and estate planning process is more than just getting a Last Will and Testament – it’s taking a solid look at your estate planning goals and coming up with a plan that works for you and your family farm (no matter the size). I think it’s really important for family farms to “improve the default estate plan” to ensure their assets are protected and will be transferred the way they wish.
Here is some valuable definitions that might come in handy when you sit down with an agriculture estate planning lawyer (like myself):
A Last Will and Testament (or “will”), is a document that gives your directions on what to do with your property when you die. It takes effect only after you have actually died, and it must be signed by you before a notary public in the presence of two disinterested witnesses (i.e., not someone who is related to you by blood or marriage and not an heir to your estate). Your will should not include instructions for a funeral or burial – this should be in a separate document (i.e., Burial and Funeral Directive).
A trust is a legal creature or entity, created by the terms of a document drafted on behalf of a person, the grantor or settlor, who transfers assets into the trust to be held or used for the benefit of named people – i.e., the beneficiary(ies). A trustee(s), selected by the grantor, is placed in charge of the trust.There are many different types of trusts. Trusts can be revocable or irrevocable. In most cases, revocable trusts are recommended (e.g., Revocable Living Trust). Revocable trusts can be amended at anytime. Irrevocable trusts can a useful mechanism for Medicaid planning in New York. Trusts can be a type of business entity with its own accounting records and Federal Employer Identification Number (“FEIN”). Putting farm assets into a trust can have several advantages. For examples, trusts pass by operation of law and avoid probate. This expedites to transfer to the beneficiaries and protects the farm family’s privacy. Testamentary trusts can also be created within the Last Will and Testament, which can be especially useful if there are minor children involved.
A Power of Attorney is a document that designates another person to act in your stead for business and financial decisions when you are unable to do so. It gives the agent the ability to care for the principal’s property (e.g., real estate, bank accounts, bonds, stocks, safe deposit boxes, taxes, retirement plans, social security, insurance, pets and service animals) and conduct business transactions. In New York, a power of attorney for medical decisions is called a Health Care Proxy. A Power of Attorney can be revoked by you at any time, and it has no further effect after you die. There are three types of Power of Attorneys: 1) Durable, 2) Limited, and 3) Springing. A durable power of attorney is effective immediately whereas a limited power of attorney (as the name suggests) is only effective for a certain period of time (e.g., real estate transaction, when principal is backpacking Europe). A springing power of attorney is effective only after some stated event (e.g., disability).
A Living Will (a.k.a. Advance Directive for Health Care or Health Care Declaration complements the Health Care Proxy allowing you to memorialize religious and/or moral beliefs as it applies to medical care (e.g., artificial nutrition, hydration, cardiac resuscitation, mechanical respiration, antibiotics, pain medicine).
Make this the year that you sit down with an attorney to make sure your estate plan is in order. If you already have one, I recommend revising every 3-5 years or whenever there is a major life event in your farm family (e.g., marriage, divorce, birth of child, death, purchase of major asset).
"This blog is for informational purposes only and is not intended to create an attorney-client relationship. It is recommended that you speak to an attorney licensed in your jurisdiction before relying on the information in this blog."