If you are a farmer or a rancher, you are hardworking and dedicated. Your farm or your ranch is more than just a way to make a living — it is your legacy. You have spent your life building something that you can be proud of and that you want to pass down to your children so that they can preserve what you have built and they can continue to provide for themselves and their families.
If you are a farmer or a rancher, you are hardworking and dedicated. Your farm or your ranch is more than just a way to make a living — it is your legacy. You have spent your life building something that you can be proud of and that you want to pass down to your children so that they can preserve what you have built and they can continue to provide for themselves and their families. Unfortunately, if you do not make an estate plan, your land and your assets may be liquidated cutting your legacy short and ending your family’s unique lifestyle choice.
Estate planning is important for everyone but especially for those who own their own business such as farmers and ranchers. If you avoid making or updating an estate plan, your assets will be subject to state intestate laws. Instead of you deciding how your estate will be settled upon your death, the courts will make that decision for you. Below are three common estate planning mistakes farmers and ranchers make and how to avoid them.
Mistake #1 – Failing to Develop a Comprehensive Estate Plan
Farmers and ranchers have complex estate planning needs because they do not just own assets but the own an ongoing business venture. Some of their heirs may want to continue operating the business; however, not all heirs may be interested in becoming or continuing to be a farmer or a rancher. If you have children who do not want to continue in the “family business,” you must decide how you will divide your estate. How will you provide for children who do not want to be a rancher or a farmer? How will you treat all of your children equally and fairly under your estate plan? What if none of your children or heirs wants to operate the farm or ranch? Many farmers and ranchers cannot decide what they should do with regard to an estate plan; therefore, they do nothing at all.
What farmers and ranchers should know is that there are many estate planning tools and options available to farmers and ranchers that allow them to protect their legacy, provide for their family, and accomplish all of their goals with regard to their estate. Regardless of your occupation, financial situation, asset mix, or family situation, you need to work with a team of experts (including estate attorneys, accountants, bankers, insurance specialists, and financial advisors) who have experience in estate planning to ensure that your wishes are clear and expressed in estate planning documents that are carefully crafted and are legally sound.
Mistake #2 – Relying on Joint Ownership
Joint ownership is often used by people who want to avoid probate by having property pass directly to the joint owner; however, this is not always the best option especially for ranchers and farmers. For example, jointly owned farmland or ranch property enrolled in programs administered by the U.S. Department of Agriculture may be ineligible for some subsidies. Furthermore, joint ownership means that you must consult with another person when making decisions about your property rather than have full and complete control over your property. Unfortunately, once your transfer an ownership interest to another person, you cannot simply “undue” that without the person agreeing to transfer his or her interest back to you. Joint ownership can also result in unintended tax implications.
Before transferring an ownership interest to a family member as a way to avoid probate, consult with an experienced estate planning attorney. There are other options available including transferring ownership of the business and assets to a business entity (i.e. a corporation, partnership, or limited liability company) or establishing a trust that allows you to control the business during your lifetime, appoint successor trustees, minimize liability, and control what happens to the ranch or farm in the future should your family not want to continue in the family business.
Mistake #3 – Overlooking The Need to Liquidate
Incapacity and death are expensive and families often require access to cash to pay expenses. As a farmer or a rancher, you want to protect your business and your assets at the same time as providing the funds necessary for your family to pay expenses. Without careful consideration and proper planning for immediate and long-term cash needs, your family may be forced to liquidate your land and equipment for pennies on the dollar in a quick sale. You can avoid this situation by creating a plan to manage debt and expenses after incapacity or death.
You have several options for providing the cash needed to pay funeral expenses or medical and other expenses if you become incapacitated. Financial advisors and estate attorneys can help you develop a plan that includes disability insurance, long-term care insurance, and life insurance. You and your attorney can discuss using complex strategies to manage expenses such as creating life insurance trusts, business entities, and trust agreements. Options are available to protect your business interests and your family.
Final Thoughts on Estate Planning for Farmers and Ranchers
Farmers and ranchers require specialized estate planning solutions, as do many business owners. The unique factors involved in ranching and farming can make estate planning more complex; however, estate planning is critical if farmers and ranchers want to protect their legacy and their family. A team of advisors, including estate attorneys, accountants, bankers, insurance professionals, and financial advisors, provide the guidance and support that farmers and ranchers need as they make important decisions about preserving and protecting what they have built and providing for their families after their death.
Our estate attorneys have a great deal of experience supporting and guiding farmers, ranchers, and others as they achieve their estate planning goals. Please call our office if you have questions about estate planning. We will be happy to schedule a consultation to discuss your estate planning goals and needs.
For more information contact our office to schedule a consultation with the attorneys at Estate Law Partners, LLC. Their experience and knowledge can help you have the peace of mind of knowing that you have a plan. Contact Attorney Daniel J. Krause or Nelson W. Donovan today.