For individuals and families in the agricultural industry, planning for incapacity and succession to the next generation can pose some unique issues in estate planning. While many decisions and situations are universal to all people preparing an estate plan, those in the agricultural industry are uniquely situated and need to pay special attention to the fact that the feasibility and impact of their decisions are often very different than their non-agricultural friends and family.
For instance, as much as we all want to ignore the fact, any of us could become disabled and unable to work at any time. For some people, that will force an early retirement. When you are in the agricultural industry, planning for incapacity is more than simply delegating another person to run to the bank for you or sign routine paperwork for you. Who will really take over for you in the decision making on the farm? How will you finance your disability or retirement? How will you pay ongoing medical bills and living expenses?
When those in the agricultural industry pass away, there are many issues that need to be addressed. What if you have some children who are active in the farm operation and others who are not? How do you address the struggle between making equal bequests to your children versus equitable bequests? And if you bequest the same property to more than one of your children, how will decision making and expense sharing be managed? Will their spouses have rights to the inherited property?
Some issues are not emotional or family issues at all but rather practical and/or financial issues. For example, if there are oil, gas, or mineral leases in place, how will those rights be treated if some children are going to inherit farm property and others are not? Transferring ownership of real property can pose challenges such as transfer taxes, uncapping, stepped up basis, and P.A. 116 contracts.
The estate plan for an individual or family in the agricultural industry will have many parts in motion. In addition to Wills, one or more Trusts are usually beneficial and they must be customized and specific to the wishes of the individual while also being the most advantageous for tax and transfer purposes. Often times oil, gas, and mineral rights are severed by way of a deed so that they may be treated differently than the surface rights of the land. Establishing various business entities and deciding which assets should be held in each entity can also be a very helpful tool. And if you need to address potential liquidity issues or want equitable distributions between children, a purchase agreement with installment terms and possibly the forgiveness of debt may help in crafting just the right plan for your situation.
Working with an estate planning attorney who understands the nuances and complexities of the farm family is the best way to work through this process. It will take a careful review and examination of your current situation and your long-term goals but it will ultimately bring peace to you and your family in knowing that there is a plan in place.
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