By Bobbi Sondreal, Succession and Retirement Planning Consultant, AgCountry Farm Credit Services
Never in my wildest dreams did I think that the world would be dealing with a pandemic during my lifetime, but here we are. This year has been full of surprising events, which have forced all of us to step back and take a fresh look at every aspect of our life, including how important is to have our estate plan up to date. In a world full of uncertainties, it is vital that your loved ones know your wishes if you cannot communicate them for yourself or your life comes to an end. This is especially true if you have a farming or ranching family that not only has assets to transfer but also has a business to preserve.
A solid estate plan includes not only a will or a revocable living trust, which leaves a set of instructions to dispose of your assets at your passing but should also include a Durable Power of Attorney and Health Care Directive. A Durable Power of Attorney appoints an attorney-in-fact to handle your financial affairs in the event you are unable to do so yourself. If you become ill and unable to perform both the physical and financial duties of your farm or ranch, who can step in and make sure your business can remain successful? If you have a successor coming into the operation, have you given them enough information to know what they need to do if you are not here to guide them? A Health Care Directive appoints a Health Care Agent to make decisions regarding your care, as well as provides guidance as to how you desire to be cared for in the event you are unable to communicate yourself. Making these types of decisions is not easy for anyone. However, documenting your wishes will help make those decisions less daunting.
It is extremely important that your estate plan is written down.
People often think things will just work themselves out the way they are supposed to but dying without a will or revocable living trust then relies on state law to dispose of your assets. What happens if you are in the middle of a transition to a farming child and all your assets, including your business assets like machinery and farmland, get distributed to all five of your children? Even if all your children give the farmer the opportunity to buy out their portion of the machinery or farmland, will he or she be able to come up with the funds quickly in these economic times? Not having the opportunity to buy or rent these assets will significantly affect the business of the young farmer. Your transition plan needs to coincide directly with your estate plan to ensure there is a plan for all your assets, especially the ones directly related to your business. Once you have a plan in place, it is important to remember to review it every three to five years to ensure the plan still aligns with your wishes.
Having an estate plan in place is important for all – young and old alike. Generally, assets are left to a surviving spouse. It is, however, important for young families to also include the appointment of guardians if there are minor children to be cared for in the event of an untimely death of both parents. You will also need to appoint a trustee to manage your assets for the benefit of your children until they attain a certain age.
The pandemic has shown us that so many things can change at the drop of a hat and we need to be ready to react if necessary. Your plan will need to be adjusted as your life and businesses are ever-changing, but the key is to have a well-documented plan. If you have completed your estate plan, now is the time to take it out and review it. If you do not have an estate plan in place, now is a great time to get it done.