Many farmers who work the land outside of Indianapolis have put a lot of time and sweat into their family farms.
As a result of their work, and with a bit of luck, they may have accumulated a lot of acreage as well as other wealth that they hope to pass down to the next generation.
To accomplish that goal, they will want to think carefully about their estate plans, as not doing so can lead to some serious mistakes that can strain family ties and cut deeply into the family’s finances.
Planning for the end of life
As farmer ages, they will likely have to take a step back from the farm’s operations. At a certain point, they may even not be able to handle their own personal finances or make medical decisions, much less handle the operation of the farm business.
As Hoosiers know well, even younger farmers can suddenly find themselves incapacitated because of an unexpected illness or a serious accident.
Not having advance directives, like a power of attorney or an appointment of a health care representative, in place can cause serious family conflict and can also create a lot of confusion. It may also mean that a family will have to spend time and money going to court to get a guardianship.
Likewise, a farmer will need to think about business succession and have a plan in place so that the farm can continue to operate should he suddenly be unavailable.
Finally, a farmer will likely want to explore options for financing a nursing home stay or other medical care well before he will need them. Without careful planning, medical expenses can eat up the farmer’s legacy.
Communication is key
At its core, an estate plan is first and foremost a legal communication from a person specifying her final wishes as to how she wants her property handled after death.
When it comes to farming families who are planning their estates, communication really is the key to heading off conflicts that could tank a family farming enterprise after a person’s death.
Naturally, good communication will mean that all estate planning documents are drafted correctly and with due attention to detail. But good communication requires a lot more than this.
For one, a person will want to start letting people know the details of the estate plan early and often. This means letting family members know the location of records and the like.
It also means that if the estate is going to be divided unequally or in a way that might come as a disappointment to some, loved ones are well aware of the reasons behind these decisions.
Finally, it is important to be sure that all parts of the estate plan are properly coordinated. This may require updating titles to land, changing beneficiary designations on retirement accounts, and the like.
Poor estate planning can hurt a person’s finances
Finally, putting off estate planning or trying to do it as cheaply as possible can cost a person financially in ways they might not expect.
Large farmers may or may not be subject to the federal estate tax, but anyone with considerable holding in farmland should be sure to at least double check and stay on top of legal developments in the federal estate tax.
Moreover, not creating an estate plan could also cause problems with creditors and even estate administration after a farmer’s death.
For example, farmers frequently don’t have easy and quick access to cash, which is often needed to handle last bills, funeral expenses and the like. A good estate plan will account for this contingency.