It’s a Thursday evening. Chores are done, the bunk’s been
covered, and supper was an hour ago. You’ve been thinking about the future
while you stare at whatever show is flashing on the television screen – what’s
going to happen to the farm? Are the kids ready to take over? Is it time to
pass on owning the farm? You know you’re not going to live forever, but how
does this all work? How will your living expenses be covered if you no longer
operate the business? What exactly will you do in “retirement”? Maybe it’s time
to start the discussion.
Starting the discussion is the first step in estate and
succession planning. Estate planning is the process of arranging for the
passing on of an estate – your assets (and liabilities). Succession planning is
arranging for transferring of management – both daily operations and major
decision making. For this article, we’ll focus on preparing for estate
planning.
Knowing where you are and how you stand is critical to
beginning the estate plan. Advisors, both financial and legal, will be looking
for a checklist of information that often includes the following:
- Family information: Names, ages, and statuses of family members (and whether any are interested in taking over the farm); any other beneficiaries
- Business information: Form of business, co-owners, and if entity – details of ownership, pertinent documents
- A list of assets and liabilities: both personal and farm-related
- Rented real estate acreage essential to the farm – any related lease documents
- Bank accounts
- Insurance policies: Life, long-term care
- Retirement funds
- Any preliminary estate planning information: Wills, trusts, social security information, etc.
Another step in the processes of starting your estate plan
is to consider what you want to get out of the process and/or how you envision
life after the plan is in place. Each person involved in the process, usually
you and your spouse, should brainstorm a list of goals or objectives to
accomplish. Your list may grow or change as you get further along in the
process and that’s okay as long as you communicate those changes with everyone involved.
Here are a few examples to get you started:
- Provide for living expenses for both spouses after retirement
- Retire or “reinvent yourself” at age 65
- Fully transfer farm assets to son and/or daughter
- Be able to travel in retirement
- Minimize estate and any other taxes
- Quickly pass on assets and ownership responsibilities
- Be sure farm remains a farm for future generations
There are a few important people to identify that you will be
asked about as well. You will need an attorney who can help you make decisions
from a legal perspective and to draw up legal documents. You may be asked
if you have an executor or personal representative to see that your wishes are
carried out, a trustee to manage a trust if you create one, and a guardian if
you have minor children or dependents in your care. A financial adviser can
help you clarify your objectives and develop alternatives to choose from when
putting together a plan to bring to your attorney. He or she can also guide you
through implementing the plan and monitoring progress.
Yankee Farm Credit offers business consulting services that
can fulfill the role of financial advisor as you venture into this next phase
of business planning. Call your local office or check out our website,
YankeeFarmCredit.com, to see what we can do for you. Good luck!
Joanna Lidback
JLidback@YankeeFarmCredit.com
(802) 334-8050
