Disclaimer - The following is meant only for educational purposes and not to be construed as legal advice.
People typically avoid talking about their death. The thought isn’t pleasant. Our natural human behavior is to avoid the subject as much as possible. Too often when forced to confront it, we tend to bring the discussion to a close as soon as possible, without proper communication. The need for proper estate planning is greatly increased when you own a farm.
Someday the farm ownership will transfer to someone else. It may be passed down to a family member. Or it may be sold for the benefit of your children. The reality is that you will not be the owner forever. Despite the uncomfortable conversations about your future death, it is very important to make decisions and communicate those plans to help your beneficiaries be better prepared and maintain healthy family relationships.
As a professional farm manager, I have been the trust officer on many of the farms I’ve managed over the years. We would all like to know what the perfect estate plan looks like, but the fact is there is no perfect estate plan. Many estate plans are vague and leave interpretations open for people to disagree. Sadly, I’ve had a front-row seat to family meetings that look more like Frazier/Ali boxing matches. These fights leave the family participants dazed and damaged emotionally and/or financially. I hope my experiences can help others avoid some common pitfalls.
Communicate Your Desires
When it comes to a trust document, trustees are charged with following the details of that document. However, oftentimes the documents are not clear and the trustee/executors are left to interpret what the owner’s wishes were. Corporate trustees can only do what the trust documents state. Non-corporate trustees/executors are supposed to follow the desires of the owner(s) but are open to doing what they want unless a family member contests.
Estate plans are made by imperfect landowners/farmers for the benefit of imperfect heirs (usually children) and guided through the process by imperfect attorneys and then administrated by imperfect trustees/executors.
To be direct, if you want your kids to have good relationships after you are gone, make the estate plan provisions plain, concise, and clear. Make sure your children have a plain and clear understanding of YOUR desires. Important tips to remember:
- Communicate YOUR desires to your heirs while you are still in good health
- Communicate YOUR desires in a way that all of your heirs receive the same message, preferably, at the same time
- When/If estate plans change, communicate them again to all of your heirs
- Be open to any questions your heirs or beneficiaries may have. Have them ask questions together as a group and THEN individually
Finding an Estate Planning Attorney
I have been asked to suggest reasonably priced attorneys to develop estate plans. Rather than focusing first on the attorney fees, you should be focusing on an estate planning attorney who can:
- Help you develop a good estate plan
- Work to clearly and appropriately convey your desired plans upon your death
- Guide you in decisions that help your family minimize the risk of conflict after your death
Finding the “perfect” attorney is a tall order. The fact is that no one can design a perfect estate plan that will ensure your children will treat each other well. However, some can help you to minimize such risks, which we will discuss in more detail in a future article.
Selecting a Trustee/Executor
Parents also struggle with selecting a trustee/executor. Unfortunately, I have repeatedly seen parents designate children or other family members who don’t have the proper skill set to do the job in a professional and ethical manner. Think very hard about who you choose for this important job, whether it is a hired professional or a family member. In my opinion, the choice of the trustee/executor is equally, if not more important, than how an estate is divided among heirs.
Equitable Over Equal
Estate plans are your plans. Nowhere does it say they must be equal. The keyword to use is equitable. What is equitable is dependent on a lot of moving parts that only you can think through and decide how to handle.
Most importantly, sit down and talk to your heirs prior to making such plans and find out what they are really thinking. Remember, that your child’s significant other will have an influence as well. That is not necessarily a bad thing. Listening is also a critical part of the communication process.
In conclusion, estate planning is one of the biggest farm business and personal challenges you will face in your life. Invest a lot of thought and analysis into the process. Get advice from sound professionals and, of course, your family. Mostly remember, your estate plan is YOUR PLAN. How well you did or did not construct your estate plan will leave a lasting impression.