We conclude our series on the top estate planning mistakes farmers make today:
- Treat all the kids the same - In our seminars on this subject, the question of how to treat farm and nonfarm kids can be the most vexing issues for farmers. Many farmers who control the farm and pass it down upon their death leave everything equally to all of the kids, while one or more children actively involved in the operation may not be recognizing the extra value that these farm kids have provided. Generally, we see that the farm operation is split from the farmland rental component; the operation goes to the farm kids and the land is split among all the kids. Many times, insurance is used to equalize this split.
- Gift away remainder, keep life estate - Many farmers assume if they keep a life estate and leave the remainder to their heirs, this asset will not be included in their estate. WRONG. This asset is included in your estate; the only thing you avoid is probate.
- Failure to stabilize and maximize values - Does the farm operation maintain key person insurance in case of death or disability? Are proper buy-sell agreements in place?
- Lack of adequate records - This will drive the trustee/executor crazy! Have you generated a system to keep track of all of these necessary documents and are they in a safe place such as a safe deposit box? Have you sat down with your planned trustee or executor and explained where the documents are and what they mean? The more you do this now, the less expensive and time-consuming it will be later on.
- Lack of a master plan for your estate - Many times farmers try to do this plan themselves and get in trouble for it. The saying "Would a surgeon do surgery on himself?" also applies to farm estate planning. You need to involve the appropriate advisers and try to meet with them at least annually to update the plan. Conduct an annual "fire drill" to see what the estate and income tax consequences would be.
Failing to plan is planning to fail. Do not fall into this trap with your estate plan.