The American dream to create a better life for our children than the one we had is worth protecting. For many Americans, years of hard work on the family farm or ranch go into building that dream, only to be diminished due to a lack of effective estate planning. Generational transfers of farms and ranches don’t just pass a livelihood down, they preserve the Western way of life, the value of hard work, and the land that we love for generations to come.
Unfortunately, it is easy to overlook the value of a well thought-out, comprehensive estate plan. This oversight or lack of planning can end a multi-generational legacy and lead to subdivisions and development in the place of productive land. Although many of us don’t want to think about a world after we are gone, an estate plan can assure that your heirs won’t have to sell the farm simply to stay above water and that your children and grandchildren can continue your family’s legacy.
While many similarities exist between a generational transfer of a family business and the passing down of a farm, agriculture presents a unique set of circumstances and challenges. One of the first and most important questions to ask before drafting an estate plan with an attorney is, “Who gets what?” As simple as that question sounds, it is more complicated when it comes to agriculture. Do all of your children want to continue to work the land or only one of them? What happens if one child wants to buy the others out – is that a possibility or will it result in having to sell off land? Family dynamics are a challenging yet imperative aspect when considering estate planning.
Having clear goals will allow you to effectively communicate those goals to your attorney and ensure that your estate plan is drafted in a way that implements your objectives. Once you have determined your succession goals, you should be clear about those goals with your potential heirs. While it may be a delicate and potentially difficult conversation, explaining your reasoning and your goals both verbally and in a written letter in addition to your estate planning documents helps avoid family conflict after your death.
Besides ensuring that your legacy continues after you are gone, effective estate planning can maximize tax savings and minimize family drama. Dying “intestate” simply means that you passed away without a will, in which case state law determines the distribution of your assets. This process requires the involvement of the courts and dictates who will serve as the executor of your estate, a role that requires paying off your debts and distributing your personal assets. By creating an estate plan, you can ensure that this important job will be done by someone who is not only willing to take on the duties of the role, but will ensure that your wishes are honored. Unfortunately, without an estate plan, your “wishes” may not be legally enforceable.
Before your estate plan can be memorialized in writing and legally enforceable, there are some other important tasks. First, assets and land must be appropriately titled to be passed down through a will or trust. Joint bank accounts, for example, may frustrate the intent of an estate document because bank ownership generally controls. If there are mineral rights included in your estate plan, those need to be properly titled and addressed. While preparing an estate plan may seem daunting, an attorney that specializes in agricultural estate planning can help you address all aspects of your generational transfer.
Last wishes ranging from the distribution of farm land and assets to the distribution of your personal effects and family heirlooms should all be included in a legally-binding estate plan in order to minimize potential family conflict. A contested estate not only tears apart a family, it can devastate them financially with higher taxes and attorney’s fees. Spending the time and money to create an estate plan now will save your family time and money and prevent quarrels, and it may just save the farm.
Katherine E. Merck is an Associate Attorney with Budd-Falen Law Offices, LLC with a primary focus on property rights, estate planning, environmental, and natural resources law. Budd-Falen Law Offices, LLC, has attorneys licensed to practice law in Colorado, Idaho, Illinois, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Texas, and Wyoming. This article should not be understood to state or imply that any lawyers of this law firm are certified as specialists in a particular field of law. Colorado does not certify lawyers as specialists in any field. The Wyoming State Bar does not certify any lawyer as a specialist or expert. Anyone considering a lawyer should independently investigate the lawyer's credentials and ability, and not rely upon advertisements or self-proclaimed expertise. This article is informational and is not legal advice. Use of this article or contact with this law firm does not create an attorney-client relationship.