We have had several requests to recap Nick Houle's presentation at the Commodity Classic last week on the Top Estate Planning Mistakes that Farmers Make. There are several of them, so I am going to break them down into three or four on a daily basis over the next week or so. The first three are as follows:
- Procrastination - This is something I see all the time. Having unsigned or outdated documents. If you do not have your own will, the state has written one for you and you may not like its terms (assets going to your parents when you wanted them to go to your siblings, etc.). Farming's complex issues can make this difficult to execute, but make sure your will is updated and you are at least doing your annual gifts. With several kids and grandkids, it is easy to give away $2 million or more in value over a 10-year period without touching your lifetime exemption amount.
- Property Transfer Rules - A lack of understanding of these rules can be fatal. Most farmers assume their will is in control of transfers. However, IRAs, life insurance, etc., have beneficiary designations and these control what happens if you get a divorce and forget to change the designation from your ex-spouse to your new spouse. The ex-spouse will inherit the life insurance proceeds if you do not fix this. Jointly held property skips probate, but is this what you want or need?
- "I Love You" Wills - Leaving everything to your spouse upon death. With larger estates, this may cost surviving spouses extra estate taxes upon their death. Should probably still have a provision for a bypass or credit shelter trust, even with the new portability rules. You still love your spouse, but by fixing your will, you love him or her even more.