Quick Tips for Farm Estate Planning
Studies have shown that fewer than 20 percent of farm families have an effective estate plan to roadmap what happens to the family farm when dad and mom retire or pass away. Death is inevitable. What is very normal is that families avoid talking about what is unavoidable.
Stop Avoiding Talking About Your Death
Make your best effort to devise a farm estate plan to minimize the damage to the family members due to an inadequate or incomplete estate plan. Poor or no planning at all can lead to deep scars that may last forever. Such damage is something that parents, as farm owners, should strive relentlessly to prevent.
The primary reason for the lack of estate planning is avoidance. Avoiding difficult discussions does not mean that the difficulties of the task will go away. Both death and accumulated wealth are complicated, complex subjects to discuss. Even more challenging is discussing your desires for the farm's future and anticipating how your family members as heirs will react to what you want to happen after you are gone.
All Families Have Dysfunction in Estate Planning
Most families have complex and challenging issues, and this is normal. Having communication struggles doesn’t mean family relationships are bad; it just means the task is complex. Even families with normal communication abilities can greatly struggle with farm estate planning. Even the best communicating families may have dysfunctional roles within the family unit, and these roles become more obvious when discussing the farm's future.
Family members can take on several different dysfunctional roles in trying to piece together their ideas on what should happen to the farm after the last living parent dies. Avoiding the discussion of the plan does not make the issues go away. Careful planning makes the struggles less painful.
In addition to creating a good plan, the dysfunctional roles (referring to the estate plan) should be identified to plan how to address problems. There are names for these roles that family members assume. These roles are the Lost Child, the Golden Child, the Caretaker, the Dominator/Bully, the Enabler, the Scapegoat, the Clown, and the Hero. Most parents can identify these roles in the family with some thought or with a counselor's assistance. Parents can rest assured that their children know who plays what roles.
Not having a plan, as mentioned, can cause irreparable damage to family relationships. In addition, there are potentially significant tax consequences. The first and most challenging hurdle to overcome is developing a plan, and the second most difficult is finishing the plan. Below are some quick tips to consider when creating a farm estate plan.
Quick Tips:
- Parents, make sure that, as spouses/partners, you are showing a unified approach to your children as heirs. Confirm you agree with each other and work out your differences.
- Get the estate plans done while you both are still living and mentally fit.
- Develop a trustworthy and competent team of planning advisors, including an attorney, advisor, accountant, and a trusted counselor/therapist. They will help you sort out family issues and emotions. The counselor can help you sort out your anxiety over the matter, which can lead to avoidance issues.
- Consider the family dynamic by asking family members what they are thinking. Often, the lost child will say, “I do not care what happens with the estate,” when, in fact, they do but struggle to say it. Others might be afraid of the dominator, and so on. Do not accept simple, short answers. Find out what they are thinking and let everyone be heard.
- Consider very carefully who you choose as the executor/trustee. A hired executor may well be worth the cost.
- Understand that keeping a farm trust flowing over multiple generations is very challenging. Understand that you cannot rule from the grave for very long.
- Carefully assess the abilities of the family member(s) chosen to operate the farm. They must be able to manage the full array of duties required, which may require training. Professional and practical communication skills are imperative when dealing with other heirs.
- Make a realistic decision about whether the farm will be financially viable in the coming years. Seek advice, as ending the direct family farm operation might be the best choice.
- Accept that it is almost impossible to be completely equal in dividing a farm operation.
- Discuss your final plans. Make sure all main assets are known to all family members.
- All significant discussions, including changes, should be held as a family meeting.
- Simultaneously, every family member should receive copies of all legal documents for the estate plan.
There is a whole lot more that goes into developing estate plans. This quick guide is a starting point for estate plan considerations. For more information, please contact Kevin Brooks at kwbrooks@illinois.edu and visit https://extension.illinois.edu/fmpt/farm-succession.