Preparing for an Estate Planning Meeting

Preparing for an estate planning meeting involves considering who you want to benefit, what you own and who is in charge of the processes.

Long ago when I first started doing Kevin’s Korners on Facebook and YouTube, I asked viewers for ideas on topics.  I expected to hear suggestions on how to administer estates, what is probate or complicated tax questions.  Instead, the first response, which was repeated by others, was what is the first step in making an estate plan.  What is the process to begin.  To put it another way, what to consider when preparing for an estate planning meeting.

So, for this blog I wanted to cover some topics and thoughts on preparing for the first meeting with an estate planning attorney.  Preparing to meet with an estate planning attorney for the first time is an opportunity to get organized and think about your wishes for the future. If you meet with your accountant every year to prepare tax returns, this may be a familiar process. It’s a chance to step away from day-to-day activities and focus on your life, as described in a recent article “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney” from The National Law Journal.  So with that, here are some issues to consider when preparing for an estate planning meeting.  This is by no means an exhaustive list, but should get you started in the right direction.  You can see here for the Kevin’s Korner video as well.  https://www.youtube.com/watch?v=B2M_-tBoSiU 

Minor Children Need Guardians. In most states, families with minor children need to designate one or more guardians to raise the children in the event both parents die. A successor should be named in case the first named guardian is unable or unwilling to serve. Discuss your decision with the people you are naming; don’t leave this as a surprise. Choosing these people is a hard decision. However, don’t let it be a reason to delay creating your estate plan. You do not want your family, or a Court, to guess what your wishes are in this regard.

Agents, Trustees, and Executors (Fiduciaries). A key component of an estate plan is who is in charge of the process, who executes your wishes or speaks for you if you can’t.  These roles, generally called your fiduciaries, are different depending on what task they need to accomplish and which legal document gives them that authority. With a Durable Power of Attorney, your assets can be managed by a named agent, if you become incapacitated. The person who manages your estate after death is the executor. They are named in your will. If you have trusts, the documents that create the trust also name the trustees. It is possible for one person to act as a fiduciary for all of these roles, although the tasks can be divided.  You also always want to consider back-ups should your first choices not be available.

Living Will and Medical Decision-Making. If you are unable to communicate your own medical wishes, an agent can make medical decisions on your behalf, including following the instructions of your Living Will.

Significant Property. Any items of significant property, whether their value is sentimental or monetary, should be considered specifically. This is helpful to avoid  squabbles over sentimental pieces of property, large or small.  Valuable or important property such as the home or business should be considered specifically to avoid delay, costs or other hazards that might affect their value or operation.

Beneficiaries.  This is probably the most obvious issue, but you should consider who will receive your property and in what manner.  For example, you might consider whether to leave your property outright to a beneficiary or put it in a trust to obtain various benefits.  You should consider if you want to take care of as much of your estate plan now as possible to make it easier for your loved ones later.  This is the decision of whether to utilize a will or a trust.  See here for a helpful guide.   https://www.galliganmanning.com/will-vs-living-trust-a-quick-and-simple-reference-guide/  You also should be familiar with the titling of your assets (your name, your and your kids’ names and so on) as well as which assets have beneficiary designations (life insurance and retirement funds are common examples) so that the assets coordinate with your plan.

You should also consider if there are any particular issues with your beneficiaries to be addressed.  For example, minor children may not receive assets until they become of age—18 in most cases- but that is hardly a prudent age to leave someone a windfall.  You can consider the use of a trust to delay the receipt of the property to a more reasonable age.  Similarly, you might want to create asset protection or divorce protection for your beneficiaries and can utilize trusts to help you accomplish that goal.  If you have a loved one with disabilities, you should consider what their needs are and are likely to be in the future.  What kind of resources do they need if you aren’t able to provide for them and where do they get that support.   As a final thought, if you are charitably minded, your estate plan is a great way to make charitable gifts and build a lasting legacy. Charitable donations can also be made to gain tax benefits for heirs.

Surviving Pets. You can plan for your pet’s care, if you pass away or become incapacitated before they die. Most states permit the creation of a pet trust, an enforceable means of providing assets to be used for the care and well-being of your pet.

Once you’ve considered the above in preparing for an estate planning meeting, you’ll have an idea of what your estate planning goals are.  That way, your meeting with a competent estate planning attorney will focus on how to accomplish those goals and you can discuss which documents are necessary to do so.

Reference: The National Law Journal (Feb. 23, 2021) “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney”

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Estate Planning for the Family Farm

Estate planning for family farms is not just about the business, it is about passing your values and legacy to your loved ones.

The family is at the center of most farms and agricultural businesses. Each family has its own history, values and goals. A good place to start the planning process is to take the time to reflect on the family and the farm history, says Ohio County Journal in the recent article “Whole Farm Planning.”

There are lessons to be learned from all generations, both from their successes and disappointments. The underlying values and goals for the entire family and each individual member need to be articulated. They usually remain unspoken and are evident only in how family members treat each other and make business decisions. Articulating and discussing values and goals makes the planning process far more efficient and effective.  What’s more, effective estate planning for a family farm may help convey these values and goals to the next generation.  This is true of most businesses, but estate planning for a family farm is more than just a simple will.

An analysis of the current state of the farm needs to be done to determine the financial, physical and personnel status of the business. Is the farm being managed efficiently? Are there resources not being used? Is the farm profitable and are the employees contributing or creating losses? It is also wise to consider external influences, including environmental, technological, political, and governmental matters.

Five plans are needed. Once the family understands the business from the inside, it’s time to create five plans for the family: business, retirement, estate, transition and investment plans. Note that none of these five stands alone. They must work in harmony to maintain the long-term life of the farm, and one bad plan will impact the others.

Most planning in farms concerns production processes, but more is needed. A comprehensive business plan helps create an action plan for production and operation practices, as well as the financial, marketing, personnel, and risk-management. One method is to conduct a SWOT analysis: Strengths, Weaknesses, Opportunities and Threats in each of the areas mentioned in the preceding sentence. Create a realistic picture of the entire farm, where it is going and how to get there.  This aspect is similar to most estate planning for businesses, so see here for more detail.  https://www.galliganmanning.com/estate-planning-with-a-business/

Retirement planning is a missing ingredient for many farm families. There needs to be a strategy in place for the owners, usually the parents, so they can retire at a reasonable point. This includes determining how much money each family member needs for retirement, and the farm’s obligation to retirees. Retirement age, housing and retirement accounts, if any, need to be considered. The goal is to have the farm run profitably by the next generation, so the parent’s retirement will not adversely impact the farm.  It may also simply be having an exit strategy and a way to monetize the farm if you choose not to continue owning or working it.

Transition planning looks at how the business can continue for many generations. This planning requires the family to look at its current situation, consider the future and create a plan to transfer the farm to the next generation. This includes not only transferring assets, but also transferring control. Those who are retiring in the future must hand over not just the farm, but their knowledge and experience to the next generation.  A key component is identifying who would operate the farm in the future, including groups of people suited to specific tasks.

Estate planning is determining and putting down on paper how the farm assets, from land and buildings to livestock, equipment and debts owed to or by the farm, will be distributed. The complexity of an agricultural business requires the help of a skilled estate planning attorney who has experience working with farm families. The estate plan must work with the transition plan. Good estate planning for a family farm may also need to address how family members who are not involved with the farm will be treated fairly without putting the farm operation in jeopardy.

Investment planning for farm families usually takes the shape of land, machinery and livestock. Some off-farm investments may be wise, if the families wish to save for future education or retirement needs and achieve investment diversification. These instruments may include stocks, bonds, life insurance or retirement accounts. Farmers need to consider their personal risk tolerance, tax considerations and time horizons for their investments.  In sum, estate planning for a family farm is essentially to protecting the integrity of the farm you’ve worked to develop and to protect the family at the heart of the farm.

Reference: Ohio County Journal (Feb. 11, 2021) “Whole Farm Planning”

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Protecting Money from a Child’s Divorce

Families with concerns about a child’s marriage are often interested in protecting money from a child’s divorce.   This often arises in situations where a parent wishes to give away assets to her children and grandchildren.  Giving assets directly to a child with an unstable marriage can put those assets in jeopardy, and this problem can be solved with the use of estate planning strategies, according to the article “Husband should keep inheritance in separate account” from The Reporter.

Everything a spouse earns while married is considered community property or marital property in most states.  However, a gift or inheritance is usually considered separate property or separate from the marriage, which is articulated differently depending on what state you are in.  If the gift or inheritance is not kept totally separate, that protection can be easily lost.

An inheritance or gift should not only be kept in a separate account from the spouse, but it might be a good idea to keep it at an entirely different financial institution. Since accounts within financial institutions are usually accessed online, it would be very easy for a spouse to gain access to an account, since they have likely already arranged for access to all accounts.

No other assets should be placed into this separate account, or the separation of the account will be lost and some or all of the inheritance or gift will be considered belonging to both spouses.  There may be other considerations about the income generated by that money, but check with your local estate planning attorney on that issue.

The problem comes when the money from the gift or inheritance is mixed or commingled with the other assets of the marriage.  Depending on what the assets are, they might be able to be untangled.  More likely, the mixing will “poison the well” and make all of it subject to the divorce.  Here is another issue: if the child does not believe that the spouse is a problem or if the child is being pressured by the spouse to put the money into a joint account, they may need some help from a family member to ensure protecting the money from the child’s divorce.

This “help” comes in the form of the parent putting the gift or inheritance in an irrevocable trust.  Everyone concerned with protecting money from a child’s divorce should consider one.

This trust will keep the money separate and will be administered under its terms.  The trust can benefit the child, but will keep the money owned by the trust from being commingled and therefore, separate property.  That way, if they divorce later, the money in the trust is protected.  Many clients love this option and include it as part of their estate plan, especially as trusts of this type have similar benefits with the child’s creditors.

The best solution is for the parent to meet with an estate planning attorney who can work with her on protecting the money from the child’s divorce.

People often attempt to find simple workarounds to complex estate planning issues, and these DIY solutions usually backfire. It is smarter to speak with an experienced attorney, who can help both parent and child in protecting the money from a child’s divorce.

Reference: The Reporter (Dec. 20, 2020) “Husband should keep inheritance in separate account”

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