Now that November is here, the holiday season is quickly approaching. Families will soon be gathering for Thanksgiving, Christmas and New Year events, and while the holiday dinner table is hardly the place to talk business, it’s often the most convenient time for families to talk about the future of the family ranch.
With aging parents, siblings, in-laws, grandchildren and great-grandchildren to consider, it can be difficult to make the tough decisions that are required of an estate plan. So, while the nitty-gritty details of an estate plan can bog down the family festivities at holiday gatherings, goal-setting is certainly a great conversation to have around the dinner table.
Knowing the goals, dreams, intentions and ideas of individual family members can help create a workable plan that, being mindful of the future, will eventually transition the ranch while also taking care of the elderly principle owners— whether that is splitting the land and operation equally amongst the siblings or passing it down to the participating son or daughter who is working on the ranch and ultimately keeping the business intact. Of course, there’s no cookie-cutter approach to this, but a blog post written by agricultural lawyer Cari Rincker lists five common priorities amongst farm and ranch families that should be considered.
These five items are an excerpt from her book titled, “Field Guide: Legal Guide for New York Farmers and Food Entrepreneurs.” Rincker suggests ag families plan:
“1. To have enough income through the retirement years. Keep in mind that it is impossible to accurately predict future medical expenses and how long a person will live, so liberally plan to have ample cash. Statistically, women live longer than men, thus should consequently save more for retirement.
“2. To avoid/reduce the estate tax (i.e., the “death tax”) and/or mitigate probate expenses to help pass on as much wealth as possible to the heir(s). Although not taxable income, keep in mind that life insurance is federal estate taxable. Business planning is one strategy that could be helpful in this area. Tying up the farm property with multiple layers of business entities reduces its fair market value (“FMV”) (but creating more administrative overhead – and headache).
“3. To pass the family farm down to a future generation — whether it be to the children, grandchildren or extended family. It’s paramount for these families to think about transferring the management responsibility of the farm to the future generation (e.g., phasing-out period) to ensure that they are properly trained.
“4. To treat children equally, keeping in mind gifts made during the life of the children (including help with advanced professional degrees, the purchase of a home or other major assets, or starting a business).
“5. To give the spouse ownership. Many farm women are especially concerned about their ability to manage the finances and/or the labor of the farm or agri-business if their husbands predecease them.”
Thanksgiving dinner might not be the best place to have these conversations; however, if all of the siblings are together for the holiday weekend, it might be prudent to schedule a business meeting time to discuss important matters and tweak, complete or begin the estate plan as needed.
What other considerations would you list for estate planning? What has worked for your family in terms of getting everyone together and discussing goals and priorities of the estate? Share your thoughts in the comments section below.
The opinions of Amanda Radke are not necessarily those of beefmagazine.com or Penton Agriculture.
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