This is a picture of my grandpa, Leland Rincker, back in the day. It's fun to see how much the cattle industry has changed over the years. He was raised on the farm that my grandparents own together. I love seeing farms being passed down from generation to generation.
For those of you who have decided to charge ahead with an “estate plan” for your family, it’s important to really think about your goals of the estate planning process. Your objectives will help guide the entire estate planning process and will be a guidepost to your estate planning attorney in helping formulate the correct game plan. As a caveat, it might not be possible to fully meet all of your goals (kinda like Bravo Julia Allison’s 73 Point Check List for the perfect mate); therefore, it is important to prioritize. When you meet with your estate planning lawyer and discuss your goals, make sure to emphasize the most important objectives to your family.
Formulating estate plan objectives is an individual process. No two farm families are the same — nor are their objectives. Generally speaking, the following are common priorities among farm families:
(1) To have enough income through the retirement years. Keep in mind that it is impossible to accurately predict future medical expenses and how long a person will live. Liberally plan for the retirement years to ensure ample cash flow.
(2) To avoid the estate tax (i.e., the “death tax”) and/or mitigate probate expenses to help pass on as much wealth as possible to the heir(s). Although not taxable income, keep in mind that life insurance is estate taxable.
(3) To pass the family farm down to a future generation — whether it be the children, grandchildren or extended family. It’s paramount for these families to think about transfering the management of the farm to the future generation (e.g., phasing out period).
(4) To treat children equally— perhaps keeping in mind gifts made during the life of the children (including help with advanced degrees, the purchase of a home, or starting a business).
(5) To give the spouse ownership. Many women are also concerned about their ability to manage either the finances or the labor of farm or agribusiness if her husband predeceases her.
Some folks may also have concerns with marriages and divorces within the family. For example, a farm family may wish to include/exclude spouses of children as owners of the farming operation or agribusiness for various reasons. Whether the couple has a prenuptial or postnuptial agreement may affect this decision. Furthermore, one spouse may be concerned about who their widow(er) may marry after their death and how assets will be passed at that time.
No matter your family dynamics, there is an estate plan for you. I urge you to have a family conversation and think about the long-term vision of your family farming operation or agribusiness. Next, memorialize (and prioritize!) your estate planning goals. Seek the guidance from an estate planning lawyer to quarterback the best possible game plan for your family.