Dear Michael: We completed our wills about 10 years ago, so they are fairly up-to-date. We are now reaching retirement age and we’d like one of our children to take over the family farm as they have been farming with us for the past 15 years. As we go through this process, is there anything we should be aware of? – Winding Down.
Dear Winding Down: It’s odd that you would say you did a will 10 years ago and should be up to date, but then in the next breath you say you would “like” one of your children to farm.
Those two things don’t go together – kind of like a mayo and peanut butter sandwich. Either you have it in your plan – in writing – how your child is going to be able to take over the farm, or you don’t – not a “wish” like you are expressing.
Too many people fool themselves that if they’ve sat down with an attorney and drafted a will at some point in the past that they “completed” their estate planning. This is giving you a false sense of security. If your will is 10 years old, it’s not up-to-date.
Who’s to say the attorney did nothing more than write into your will what you told him to put there? Did you know what the right thing was to put into your will?
For example, what is the exact plan for your farming child – written out in the will – as to how they will receive the farm business and still keep it profitable after meeting all the demands of the estate? Is there a way for them to keep the business going if they have to pay hundreds of thousands of dollars to their non-farming siblings? I find 90 percent of the people who come to me to look over their wills have planning that hasn’t taken into account the massive growth in land values over the past 15 years.
Secondly, is there a condition in your will that if your farming child should die prior to your death or shortly after your death, your land will stay in your family name – or will it go to a spouse of the decedent child who would then NOT be a family member regardless of how you feel about them?
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Is there a time period where the farming child can’t just cash in and say, “I’d rather take the money and run.”
Many people state that if the farming child should sell out within a stated period of time after death of the parents and receiving hundreds of thousands of dollars more than their siblings, they’ll have to share with their siblings if they (or their heirs) don’t farm for a stated period of time – say 10 years or to age 55 – whichever is sooner. In western North Dakota, during the oil boom, siblings came to blows over who got the oil rights on the land. Just imagine if one of them walks away with millions of dollars and the other’s get stiffed?
Any other area in the U.S. and those blows likely would have been fatal, in a lot of cases.
Anyway, here’s the thing. Check with someone who knows what they are talking about to help you see and plug the holes in your estate plan.
Remember an estate plan isn’t just a will – it’s a plan for what you’re going to do today (transition plan), what you’re going to do if you have an emergency (health problems) and a plan for what’s going to happen when you die (a will).
If you don’t have all three of these – transition, health issues and wills – covered and working in the same direction, then you don’t have an up-to-date estate plan.