Stop Worrying, Start Planning-Preparing for Estate Planning

Written by Joanna Lidback


It’s a Thursday evening. Chores are done, the bunk’s been covered, and supper was an hour ago. You’ve been thinking about the future while you stare at whatever show is flashing on TV – what’s going to happen to the farm? Is the next generation ready to take over? You know you’re not going to live forever, but how does this all work? How will your living expenses be covered if you no longer operate the business? What exactly will you do in “retirement”? Perhaps it’s time to start the discussion.

Planning to transfer a farm business generally consists of two parts: estate and succession planning. Estate planning is the process of arranging for the passing on of an estate – your assets and liabilities. Succession planning is arranging for the transferring of management – both daily operations and major decision making. For this article, we’ll focus on preparing for estate planning.

Knowing where you are and how you stand is critical to beginning the estate plan. Advisors, both financial and legal, will be looking for a checklist of information that may include the following:
 
  • Beneficiaries: Names, ages, and statuses of family members and whether any are interested in taking over the farm; any other beneficiaries
  • Business information: Form of business, details of ownership, pertinent entity documents
  • Listing of assets and liabilities: both personal and farm-related
  • Rented real estate acreage essential to the farm and any related lease documents
  • Bank accounts
  • Insurance policies: Life, long-term care, key person, etc.
  • Retirement funds
  • Any preliminary estate planning information: Wills, trusts, social security information, etc.

Next, consider what you want to get out of the process and/or how you envision life after the plan is in place. Each person involved in the process, usually you and your spouse, should brainstorm a list of goals or objectives to accomplish. Your list may grow or change as you get further along in the process and that’s okay as long as you communicate those changes with everyone involved. Here are a few examples to get you started:
 
  • Provide for living expenses for both spouses after retirement
  • Retire or “reinvent yourself” at age 65
  • Fully transfer farm assets to son and/or daughter
  • Be able to travel in retirement
  • Minimize estate and any other taxes
  • Pass on assets and ownership responsibilities quickly
  • Be sure farm remains a farm for future generations

Now, there are a few important people to identify. You will need an attorney who can assist from a legal perspective and draw up legal documents. You may be asked if you have an executor or personal representative to see that your wishes are carried out, a trustee to manage a trust if you create one, and a guardian if you have minor children or dependents in your care. A financial advisor can help you clarify your objectives and develop alternatives from which to choose when putting together a plan for your attorney. A financial advisor can also guide you through implementing the plan and monitoring progress.

Looking for a few more tips? Check out this post by Natalina Sents, sharing AgCountry Farm Credit Services, Marlene Bradbury's tips for successful planning: 11 Don’ts of Succession and Retirement Planning

Yankee Farm Credit offers business consulting services that can fulfill the role of a financial advisor as you venture into this next phase of business planning. Call your local office or check out our website, YankeeFarmCredit.com, to see what we can do for you. Good luck!
 

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