Estate plan may need revision
Soaring farmland values in 2011 and the continuing increase into this year are raising a number of questions. Important questions if you own land are: How is this rapid increase affecting your estate plan? Is your present plan outdated?
• Soaring farmland values are a good reason to review your current estate plan.
• Find an estate planner who can help you develop or revise your particular plan.
• The questions you should ask will depend on your objectives and circumstances.
Wallaces Farmer recently received the following question from a reader and sent it to us at the Center for Agricultural Law and Taxation at Iowa State University. My answer and suggestions follow.
Q: Rising land values make me think I need more help planning my estate than the simple will my lawyer prepared. Lots of people call themselves financial advisers and estate planners. A couple of them I’ve contacted seem more interested in selling life insurance, annuities and mutual funds than helping me transition the farm to the next generation. How do I find a good estate planner? What kind of estate planning questions should I ask?
A: It is important to review your estate plan periodically. As you mention, changes in both personal and economic circumstances should prompt a review of any estate planning documents and decisions previously made to ensure your estate planning objectives are still being met. Also, the federal estate tax law is in a state of flux, so long-range planning is difficult.
An experienced attorney can provide you with individualized strategies to minimize or avoid paying taxes at death based on your asset values, circumstances and objectives. The attorney can also help develop a plan for the transition of your farming operation based on your plans and general timing for transferring the operation.
Start with an attorney
If you haven’t previously done estate planning, you may not be sure where to find an experienced attorney to help you get started. If you work with an attorney in your family business, you could ask the attorney for a referral to an attorney with experience in estate planning located in the area. If you don’t already have an attorney, ask for referrals from other professionals and individuals you trust, such as accountants, bankers or other business people. The Iowa State Bar Association can also provide a list of lawyers in your area.
If you have already had an attorney prepare a will, you may want him or her determine whether there are any changed circumstances or changes in the law that might affect your plan. If changes are necessary, often they can be made easily. If you believe your objectives have changed or your asset values have increased significantly since the last time you put together a plan, major changes may be needed and a referral may be necessary.
If you are meeting an attorney for the first time, make an appointment to meet face to face. There may be a charge for this meeting, so you’ll want to ask about this when scheduling. But in the long run, you want to make sure you can work with and trust this person. Use your common sense and trust your instincts.
Lawyers will keep your conversations confidential, but you must be willing to provide information to the lawyer to ensure your planning objectives are met. If you don’t feel comfortable sharing this with the lawyer, then your plan will suffer.
Ask the right questions
The questions you want to ask will depend on your objectives and the complexity of your circumstances. Before you meet with an attorney, you should put together a list of all of your assets. Many attorneys have forms you’ll complete before your appointment to assist with this. This can be time-consuming, but it will save time for the attorney (which you would have to pay for) if you do it yourself in advance.
Important assets to document would include things such as real estate, insurance policies, stocks and bonds, and annuities. You also want to document debts and liabilities. Family members who will be affected by the estate plan, including children, grandchildren and others, should be discussed. Current and future perceived needs of family members, whether property will be left to charities, or gifts to be made to individuals during your lifetime are also things to consider.
In addition, the transition of the farm business will require careful consideration and planning. You will want to consider whether you want the land and farm operation to continue and under whose management. You may want to consider whether other assets can be used to make an equitable distribution to any off-farm children, possibly finance your retirement, and ensure the farmland remains intact.
These are just a summary of considerations. It is not possible in this space to address the many different objectives and circumstances each person may have. But the most important questions you should ask first include: Do I feel comfortable with this attorney and the attorney’s level of experience; what comprises my estate; and what do I want to accomplish with my estate now and in the future? Once you have answered these questions, then the question to ask the attorney is, “What’s the best way to achieve this?”
This article published in the April, 2012 edition of WALLACES FARMER.