Working with families and their attorneys is one of the most interesting aspects of my job. We rarely have input as to which attorney we are working with unless the client asks. Regardless, we always prepare an agenda and organize the critical information for a very productive meeting. After working with hundreds of attorneys in many states, you can probably understand why estate planning meetings can get very interesting, very quickly. All attorneys have a little bit of their own twist or idea on things. Now I obviously only work with farming clients. That’s why I certainly appreciate it when the attorney understands farming as well. Unfortunately, that is not always the case.
There are times when I question what would happen at the attorney appointment if I were not there. Would the plan be very generic and not address the real farm continuation concerns? Would the focus be on something trivial, while something that’s very important gets overlooked? Would things get more complicated than they needed to be? Would there be follow up to make sure the ownership methods and beneficiary designations were coordinated with the legal documents?
Please understand, I am not trying to be negative about attorneys whatsoever. I am just bringing awareness to the issues that can come up. Some attorneys really do understand the critical points of farm succession planning. For instance, I recently met my clients and their attorney. He talked a lot about debt, taxes, probate, farm continuation and sibling issues. The parents understood because we had gone over those very same issues in earlier meetings. Then the attorney asked the husband if he knew what soil erosion was. At first, he just had a puzzled look on his face. This was an estate planning meeting after all. We weren’t talking about soil conservation! It didn’t take long though, and the client knew exactly what point the attorney was trying to make. The parents already understood that it was bad to lose farm ground from wind and water erosion. Now the attorney was talking about losing their farm to many other types of “estate erosion”.
About ten minutes later, we were talking about other issues and the language that should be included in the will. In particular, the attorney mentioned a disclaimer provision that the surviving spouse would have at the first death. We had covered that in our earlier meetings too, but the client asked the attorney, “Why do we need that?” The quick-witted attorney responded right on que. He looked directly at the client and asked, “Do you have a tractor?” Clearly the attorney knew the answer would be “yes”. “Well yes, of course”, the husband responded. The attorney then followed up by saying, “Does your tractor have a PTO?” Again, the client responded quickly with a “yes.” The attorney then asked, “Do you use the PTO every day?” The client shook his head no.
Now the attorney had him right where he wanted him. His point was about to be made. He said, “We put this disclaimer provision in your plan just in case its needed when you die. Just like the PTO on your tractor, we might not need it in every situation, but when you do, it sure is nice to have it.”
Sometimes people ask me if they will need to change their estate plan in a few years if the laws change. The thought of having to make changes almost makes some people feel like not even planning at all. They think if the rules are going to change, then what’s the point of doing anything now? I feel that would be a HUGE mistake!
I would highly recommend resolving the most critical farm succession issues today, regardless of potential changes in the future. There are several ways to go about that, and each situation is different. Farm continuation though is not something I would leave to chance.
Other issues such as federal estate taxes, determining what goes into trusts, and farm valuation methods are all things that may change. That is when having an “estate plan PTO” comes in handy. If I go out to the field and something breaks down and all I have is a hammer, then I will be very limited on my ability to fix the problem. If I have a good toolbox, or a stocked tool truck, then I have a much better chance to deal with a variety of issues.
We are not guaranteed of another day and we do not know what the rules may be when our final day comes. Some situations simply benefit from having additional flexibility; such as the ability to disclaim assets at first death, the option to rent ground, the option to buy ground, primary and contingent beneficiary designations, naming of executors, trustees, guardians, successors, etc.
Again, I strongly believe it is important to define the farm continuation strategies as part of the overall estate plan. Scary things can happen when the farm succession is left to chance!
Start with the basics. Your tractor needs to start and run. After the basics, there should be some key options. Once I know my tractor will keep running, I also need to have the PTO, 3-point hitch, hydraulic outlets and other functions of my tractor in good working order in case I need them. You need to have the other parts of your strategy in place in case they are needed some day as well.
So here are the two questions: Will your “farm estate tractor” keep running after you die? Does your estate plan have a “working PTO” if needed?