Michigan Estate Planning Blog

Why Is a Trust Smart Estate Planning for Farmers?

 

A will gives people the basic assurance of where farm and personal assets will go at an owner’s death. However, a trust can give you added detail and instruction, plus flexibility to transition your farm in the manner you intend.

The LeMars Daily Sentinel’s recent article entitled “Trusts can serve as important estate planning tool for farm families” says that a trust is a very useful and flexible tool for estate planning. However, it’s most likely the most underused estate management technique.

A trust is essentially the creation of another entity to hold title to assets and then writing the rules as to what should happen with those assets, while so held.

An experienced estate planning attorney will help you decide if a trust is necessary in your specific family situation. More complicated situations with multiple generations and rights of ownership and management can make a trust a wise choice.

Some of the common mistakes people make with trusts include forgetting to retitle assets into the trust now or by beneficiary designation, so they will become part of the trust at death, and making certain the parties comprehend the types of tax liabilities based on the type of trust that is created. There are two main types of trusts—living and testamentary trusts. A living trust is established by a living person, as opposed to a testamentary trust that is created in a will and goes into effect at the time of death. Living trusts can be revocable or irrevocable. Every trust has different stipulations on what the grantor can and can’t control, as well as different types of tax liability.

With the help of an experienced estate planning attorney, a trust can help keep a family member in farming and let the other family members receive ownership in the farm, land, money, or whatever assets the grantor chooses. Due to the fact that farm operations have so many moving parts and expenses, a trust can help make the transition as easy as possible and can accomplish the goals of the grantor.

You should be transparent with family members and tell each one where they stand concerning the estate. Sharing documents and holding family discussions can also help keep everyone on the same page.

Everyone should have a copy of these documents, including a will, power of attorney, or a trust because everyone in the family should know what is going on.

Reference: LeMars (IA) Daily Sentinel (Dec. 29, 2020) “Trusts can serve as important estate planning tool for farm families”

Why Is a Trust Smart Estate Planning for Farmers?

 

A will gives people the basic assurance of where farm and personal assets will go at an owner’s death. However, a trust can give you added detail and instruction, plus flexibility to transition your farm in the manner you intend.

The LeMars Daily Sentinel’s recent article entitled “Trusts can serve as important estate planning tool for farm families” says that a trust is a very useful and flexible tool for estate planning. However, it’s most likely the most underused estate management technique.

A trust is essentially the creation of another entity to hold title to assets and then writing the rules as to what should happen with those assets, while so held.

An experienced estate planning attorney will help you decide if a trust is necessary in your specific family situation. More complicated situations with multiple generations and rights of ownership and management can make a trust a wise choice.

Some of the common mistakes people make with trusts include forgetting to retitle assets into the trust now or by beneficiary designation, so they will become part of the trust at death, and making certain the parties comprehend the types of tax liabilities based on the type of trust that is created. There are two main types of trusts—living and testamentary trusts. A living trust is established by a living person, as opposed to a testamentary trust that is created in a will and goes into effect at the time of death. Living trusts can be revocable or irrevocable. Every trust has different stipulations on what the grantor can and can’t control, as well as different types of tax liability.

With the help of an experienced estate planning attorney, a trust can help keep a family member in farming and let the other family members receive ownership in the farm, land, money, or whatever assets the grantor chooses. Due to the fact that farm operations have so many moving parts and expenses, a trust can help make the transition as easy as possible and can accomplish the goals of the grantor.

You should be transparent with family members and tell each one where they stand concerning the estate. Sharing documents and holding family discussions can also help keep everyone on the same page.

Everyone should have a copy of these documents, including a will, power of attorney, or a trust because everyone in the family should know what is going on.

Reference: LeMars (IA) Daily Sentinel (Dec. 29, 2020) “Trusts can serve as important estate planning tool for farm families”

Planning for Your Special Needs Child

1. Caring for your child with special needs requires much more thought and planning. After all, you are responsible to ensure the well-being of your child in a world without you. How can you possibly ensure for the future of your children, especially when they have certain dependencies? CNBC recently touched on this topic offering up a solution - the special needs trust. If this topic touches you and someone you love, then take a moment to read the original article titled “Special needs trusts: Helping parents provide for kids' futures.” Trusts are powerful legal devices made to do what you program them to do, all under the watchful gaze of a responsible trustee. The needs of a child with special needs are especially amenable to special planning. You can’t leave your assets to them outright, as your child is likely unable to use them. In fact, just owning them might endanger their government assistance. Sure, money could be left to another child or other loved one with express instructions to care for the special needs child. However, without formalization, it’s never guaranteed that the money will be used for this purpose. Instead, that money would be open to the other individual’s liabilities, suits, divorces, and other legal pitfalls. The special needs trust solves all of this in a very tidy way and even ensures that there is always a financial guardian of sorts in the trustee. Why do you need to leave assets to your child with special needs in the first place? After all, they will be receiving government assistance, right? This depends greatly upon the nature of the care needed, of course. But as many parents can already attest, those government benefits can only take you so far and even sometimes force decisions. Your special needs trust can care for them without any benefits, if your have the means of course. In reality the express goal of a special needs trust is to bridge the gaps and protect all aspects of their life and longevity. Just what kind of a trust you can put together and what kind of needs you have to fulfill depends on your finances and your child. Regardless, the trust needs to be drafted by a steady hand and a careful mind. Competent counsel can knit together the plan, the ability and the needs in light of current (and even future) laws and regulations to provide for a loved one’s care. In the end, that’s not just peace of mind now, but the assurance of a happy life for your loved ones who cannot take care of themselves.

   Reference: CNBC (May 31, 2014) “Special needs trusts: Helping parents provide for kids' futures”

Planning Your Family Business Legacy

Sometimes, passing along your assets to the next generation is simply a matter of passing them along. You just let the gift and the potential represented by that gift be your legacy (emphasis on the “sometimes”). However, when the asset is a business, it is rarely that simple. A business is not merely a thing. No, a business is a mindset, an activity and, oftentimes, even a lifestyle. It can get complicated. If your legacy is the family business, then with great responsibility comes the need for equally careful planning, preparation and dialogue. Because every business is different, as every family is different and every individual is unique, what is right for a family business is something to be figured out and understood. That said, businesses have been coming and going for generations. Some have transferred successfully and others less so. Consequently, there are some tried and true strategies to consider when planning for your own family business succession. Whether your objective is a sale, windup or succession, Forbes has provided a practical roadmap in a recent article titled “Six Steps For Making Your Business A Family Legacy.” Here are the six steps by heading alone: 1. Give the family a reason to continue the family business 2. Develop a management team 3. Structure a business succession plan 4. Fund the business succession plan 5. Wealth replacement for other family members 6. Have a successful business So what is right for you, your family and your business? I recommend reading the original article and then consulting with your team of professional advisors. Your attorney, accountant, financial planner and insurance agent will each bring a valuable and unique skill set to the table.

Reference: Forbes (February 3, 2014) “Six Steps For Making Your Business A Family Legacy”

For more information, see www.jerryreiflawyer.com

Family Farmers Should Keep a Weather Eye on the Estate Tax Exemption

The Joint Economic Committee recently released a report on the devastating power unleashed upon family farms when an estate tax is triggered. Simply titled “Estate Tax Report Released,” the committee also considered the broader impact on the economy. The report, approved by the American Farm Bureau Federation and examined in Farm Futures, notes that, while farm owners may have a great potential wealth … such wealth is tied up in land (an illiquid asset) and is not necessarily cash-in-hand. However, the IRS will hold you accountable for the estate taxes due on your land, even if you have to sell the land to pay for it. "When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings, or equipment to keep their businesses operating," said AFBF President Bob Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax." If you (or a loved one) own a family farm, then there is no time like the present to make proper estate plans to protect and preserve the farm and the family wealth it represents. You have worked hard to make a living from your farm. Isn’t it common sense to spend some time and money protecting and preserving it?

Reference: Farm Futures (July 26, 2012) “Estate Tax Report Released”

Estate Planning for the Family Farm

Living and working on a farm oftentimes means taking a different position toward land itself. If you also own the land, then it means you need to take a different stance toward your assets and your family wealth. Farmers are in need of a proper and exhaustive estate plan more than anyone else. Fortunately, Hoosier Ag Today provided some helpful pointers in an article titled “Estate Planning for Family Farms and Ranches.” While there are consistently bumper harvests, the land keeps on giving. Unfortunately, the land also is an incredibly valuable thing due to this potential giving. As a result, that value makes it fall prey to estate taxes if you try to pass it on to the next generation. To truly own and understand the ownership of your land, it is necessary for a farm owner to make proper estate plans and to prepare for succession of the farm. For small farms that might be a simpler process, even modest planning can help preserve the family and the farm alike. In the end, many farms will need far more than modest planning. The key is to select and implement the appropriate strategies for your unique circumstances. I recommend reading the original article, even if you aren’t a Hoosier.

Reference: Hoosier Ag Today (June 4, 2012) “Estate Planning for Family Farms and Ranches”

Estate Planning for the Family Farm

Living and working on a farm oftentimes means taking a different position toward land itself. If you also own the land, then it means you need to take a different stance toward your assets and your family wealth. Farmers are in need of a proper and exhaustive estate plan more than anyone else. Fortunately, Hoosier Ag Today provided some helpful pointers in an article titled “Estate Planning for Family Farms and Ranches.” While there are consistently bumper harvests, the land keeps on giving. Unfortunately, the land also is an incredibly valuable thing due to this potential giving. As a result, that value makes it fall prey to estate taxes if you try to pass it on to the next generation. To truly own and understand the ownership of your land, it is necessary for a farm owner to make proper estate plans and to prepare for succession of the farm. For small farms that might be a simpler process, even modest planning can help preserve the family and the farm alike. In the end, many farms will need far more than modest planning. The key is to select and implement the appropriate strategies for your unique circumstances. I recommend reading the original article, even if you aren’t a Hoosier.

Reference: Hoosier Ag Today (June 4, 2012) “Estate Planning for Family Farms and Ranches”

Is Retiring from the Farm Harder than Leaving the Mob?

If you or someone you love is a farmer, then you know the special challenges that generally come with estate planning and, more specifically, the succession of the farm. Planning for your estate and for your family is a difficult concept, but it’s ever more difficult when it means planning for the land itself. A recent article from Drovers Cattle Network titled, “Commentary: Can you retire?” offers an interesting perspective on the farmer’s estate planning challenges. In the end, whether bovine, equine, or straight up agricultural, the problems are the same. Farms are living places in every sense of the word; any overseen gap in a farm is like a missed heartbeat. Will there be a missed beat or two between yourself and the next land cultivator? If yes, it may be more than either you or the land (the herd, the flock, or what have you) can bear. Planning for the farm succession is no easy feat in these generations, especially with youth more and more concentrated in urban locations/lifestyles and the farm a perennial casualty to the estate tax. It’s important to remember that any successful farm transfer is one that will have to begin early, with a well thought-out plan. How to transfer the farm is another matter, and a complicated one depending on your potential heirs, or buyers, and the farm itself. You owe it to yourself and to the land to appreciate these difficulties and form a full-fledged plan to deal with them. Be sure to engage competent legal counsel experienced in working with agricultural assets and farming families.

Reference: Drovers Cattle Network (May 28, 2012) “Commentary: Can you retire?”

Is Retiring from the Farm Harder than Leaving the Mob?

If you or someone you love is a farmer, then you know the special challenges that generally come with estate planning and, more specifically, the succession of the farm. Planning for your estate and for your family is a difficult concept, but it’s ever more difficult when it means planning for the land itself. A recent article from Drovers Cattle Network titled, “Commentary: Can you retire?” offers an interesting perspective on the farmer’s estate planning challenges. In the end, whether bovine, equine, or straight up agricultural, the problems are the same. Farms are living places in every sense of the word; any overseen gap in a farm is like a missed heartbeat. Will there be a missed beat or two between yourself and the next land cultivator? If yes, it may be more than either you or the land (the herd, the flock, or what have you) can bear. Planning for the farm succession is no easy feat in these generations, especially with youth more and more concentrated in urban locations/lifestyles and the farm a perennial casualty to the estate tax. It’s important to remember that any successful farm transfer is one that will have to begin early, with a well thought-out plan. How to transfer the farm is another matter, and a complicated one depending on your potential heirs, or buyers, and the farm itself. You owe it to yourself and to the land to appreciate these difficulties and form a full-fledged plan to deal with them. Be sure to engage competent legal counsel experienced in working with agricultural assets and farming families.

Reference: Drovers Cattle Network (May 28, 2012) “Commentary: Can you retire?”

Family Farm Succession Success – Not Automatic

Farm and family. Perhaps more than any other kind of industry or property, planning for the succession of the family farm poses a significant challenge to the estate planner. Some of these challenges are described in a recent article in Agri-View titled Estate planning lays framework for smooth transition. When the farm is a family farm, and therefore also the family business, planning for your estate is really about planning for the succession of the business and the farm. This can be a delicate process, but it is better to start the process sooner rather than later. For one thing, don’t overlook the fact that farmland values can trigger estate taxes (real estate bubbles aside, land is the only thing that consistently grows in value – ‘cause God ain’t makin’ any more of it’ – and farms are all about land). Accordingly, some rather sophisticated estate planning (and liquidity planning) may be in order, or the family farm could be lost to the IRS. Not good. Estate taxes aside, there are many other considerations to secure the future of the “family” element of the family farm. For example, who will inherit the farm, let alone continue to operate it? What if your children live in the suburbs and work every day downtown? Who will actually do the “farming?” Perhaps renting or sharecropping might be more practical. Regardless, these are the kinds of practical real-world matters that ought to be decided with a legal framework to ensure succession success. So, if you are a farm-owner, and particularly the owner of a family farm, then there is much work to be done. While I recommend reading the original article, be sure to engage competent legal counsel, as well as any farm extension agent assistance that may be available.

Reference: Agri-View (March 29, 2012) “Estate planning lays framework for smooth transition”