Economics Finance

Farm succession and planning is such a never-ending process that what was said during your first conversation with your spouse or another family member can take place weeks even months before you share what was discussed with your advisers.

If you don’t write down what is said, in an order that makes accurate recall possible, your communications will be like those described by Lewis Carroll, “I know you believe you understand what you think I said, but I am not sure you realize that what you heard is not what I meant” in Alice in Wonderland.

Writing down what people say when they say it is important, because in the end what you are trying to achieve and create is a sort of “relationship agreement” that spells out how you and they all see the future together. Maybe what comes out of these farm succession and planning conversations is a collection of relationship agreements on simple issues as well as your mutual ideas for the big ones.

Whenever two or more people are involved in a long term interdependent relationship there is likely to be disagreement. In a family business these disagreements are often more acute because they are never just about business – they are always tinged with something personal, everyone has a history and a future that gets lumped into whatever infraction of the code is observed by the others. Continue reading ‘Farm Succession and Planning Key – Write Everything Down’ »

For a farm succession plan to succeed there must be a timetable for specific actions to take place. Everyone involved must be able to see when certain benchmarks are reached. If there is no agreement on when certain elements of the process will be put in place – why should they believe you are really serious about farm succession planning this time either?

Remember the first time you told someone that you’d do something, like clean the shed or wash the pickup, when you get around to it. And they whipped out a wooden coin that was stamped “Round Tuit” across it. Ok, so now you have the round tuit – when are you going to start on the shed?

Farm succession planning lends itself perfectly to being put off doesn’t it? If you hadn’t been putting it off all this time you would have no reason to read this would you?

Let’s face it, we all spend far too much time living on “someday isle” and since the farm succession planning issues reside there as well – we’ll get started on the discussion after the crops are in, after the holidays, after the crops are planted, after vacation, after the association meeting, or worst of all – after we have everything figured out.

It does not seem to occur to people that the process of farm succession, passing down the farm – is really about figuring out what we want to happen. It’s about getting clear on what’s important to us, our spouses, and our families.

Farm succession is 90% knowing what you want the future to look like and 10% having the documents and contracts in place to see that it will all come together in the end. Continue reading ‘Farm Succession When You Get “A Round Tuit”’ »

If you have decided to prepare a will, you have already minimized much of the potential conflict that can arise between potential heirs. As a person who has written a will, known as a testator, you have control over what happens to your assets after you are gone. People who do not leave a will, on the other hand, leave the fate of their assets undecided, and the responsibility to determine who inherits the assets typically falls to the state. This lack of planning can put considerable stress on family members and may lead to contentious conflict over your estate.

Ensuring That Your Will is Probated

When you decide to write a will, be sure to consult the laws of your state. Each state has different requirements for what constitutes a valid will and not meeting these criteria could prevent your will from being probated later on. An experienced probate lawyer can help to ensure that you take all of the necessary steps to create a valid will. Continue reading ‘Avoiding Conflicts Over Inheritance’ »

Estate planning is a process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker and broker. Estate planning covers the transfer of property at death as well as a variety of other personal matters and may or may not involve tax planning. There are many questions that you must ask yourself before beginning your estate planning.

First, what is involved in estate planning? There are many issues to consider in creating an estate plan. First of all, ask yourself the following questions:

• What are my assets and what is their approximate value?
• Whom do I want to receive those assets-and when?
• Who should manage those assets if I cannot-either during my lifetime or after my death?
• Who should be responsible for taking care of my minor children if I become unable to care for them myself?
• Who should make decisions on my behalf concerning my care and welfare if I become unable to care for myself?

Second, who needs estate planning? You do-whether your estate is large or small. Either way, you should designate someone to manage your assets and make health care and personal care decisions for you if you ever become unable to do so for yourself. If your estate is small, you may simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets. If your estate is large, your lawyer will also discuss various ways of preserving your assets for your beneficiaries and of reducing or postponing the amount of estate tax which otherwise might be payable after your death. Continue reading ‘Are You Leaving Your Estate Planning to Chance?’ »

Estate Planning is an item that may not concern the younger readers. But, for the older folks this can be of some concern.

An Estate Planner will have you list the contents of your home. So as to be able to either auction off or who gets what from your estate. Depending upon your wishes. Planning ahead will prevent headaches between family members when your time comes. Continue reading ‘Estate Planning’ »

During my career I have found that most succession plans fail. The plan itself might or might not have achieved the family’s objectives for farm succession and transition to the next generation, but it ran out of gas before it was ever completed.

It ran out of gas because there was no one in charge – no one without an axe to grind that is, who was willing to ask the hard questions and push for the answers – so the plans could actually be created and implemented based on good information.

Most succession plans or estate plans or whatever you choose to call them are sold. That is, someone sold you or your folks or whoever is in charge on the idea that planning for the future succession of the farm is a good thing to do and they are just the person to help you do it.

There’s certainly nothing wrong with that, often we must be “sold” in order to break the inertia that surrounds us. When we were kids we had to be “sold” on taking a bath, brushing our teeth, and putting our toys away. Nothing really changes – the things we know down deep we really ought to do won’t get done unless we’re sold on the benefits of doing them right now.

It’s just that we we’re sold something we either have to stay sold or we’ll lapse into whatever “someday it will all work out” frame of mind we feel comfortable in. Continue reading ‘Farm Succession Plans Almost Always Fail’ »

Having the status of Chartered Accountants we are often faced with resolving the financial affairs of clients passing away suddenly.

If plans for economic management have not been put in place, this can cause solemn problems for those left behind. Here’s a straightforward checklist that can help. It’s our responsibility to ensure we do these things before we die:

1. Record the name of your bank account numbers and passwords. Keep this information confidential. Put it with your lawyer or your accountant or better still, both professionals. Ensure that the document is only to be opened and read upon your death.

2. Record a written message to your spouse or family, your lawyer or your accountant. Stipulate the steps that should be taken on your passing. For instance, does someone owe you some money which hasn’t been recorded in say your financial statements but which you want collected on your death? Continue reading ‘Do You Have a Financial Game-Plan For When You Die?’ »

Every person has a dream of planning a secure future for his family. No one knows when he might die so people try to plan for future in a way to provide security to their partners, children and even relatives. People mostly use wills to provide this safety net. Wills ensure the division of wealth and the rest of the belongings the way a person would want it after his/her death.

Some people tend to think that a will cannot be enough to settle difficult matters like property distribution among the heirs, and they want something more. They opt for a trust that is more practical and easier to manage. This is especially true in cases where the heirs are underage and other people cannot be trusted. In these situations a trust could come real handy.

Beneficiary trusts are run under the name of a beneficiary and a trustee is chosen by the settler to manage it. According to the laws in United Kingdom, the settler has to make it very clear what the goal of the trust is, and what powers are being granted to the trustee. There are many different kinds of beneficiary trusts that are supported by the laws of inheritance in UK. Continue reading ‘How Do Beneficiary Trusts Work?’ »

There is a period of non-eligibility for Medicaid for those who have recently transferred assets. The DRA was enacted in 2006. For transfers that were made prior to the enactment, officials will only look at any transfers that were made within 36 months of the application. If transfers were made after the enactment of the DRA, there is a look-back period of 60 months. This period determines how long you must wait to become eligible for the program after the transfer was made.

The formula is based on the amount that was transferred. It takes the total amount transferred and divides it by the average monthly cost of nursing care. For example, if $100,000 was transferred and the nursing costs are $5,000 per month, the waiting period, or penalty period would be 20 months. There is another rule that is involved with the look-back period. The penalty period will not begin until the individual has moved to the nursing home, has spent down their assets to be eligible for the program, has applied for coverage and has been approved for the coverage but not for the transfer.

When making transfers, it is very important to be aware of these rules and time frames. This information will help you better plan your Medicaid asset protection. Make sure that all transfers are done prior to the time of needing nursing care. It is suggested that if you are considering transferring your assets, you do so as soon as possible. This will eliminate any waiting when Medicaid coverage is needed. If transfers are made within the five year look-back period, the penalty time could actually extend past five years. This will depend on the amount of assets that were transferred.

There are many factors to consider when making transfers. You should take into consideration the estimated cost of nursing care you will need, the transfer penalty in the state in which you reside, your current and projected income and other living expenses. The main goal of the DRA was to try to eliminate any planning. The best solution is to contact an elder law expert to assist you with planning and asset protection transfers.

You should also be aware that transfers could have tax consequences if not done correctly. If you transfer the assets to your children, they will be responsible for all taxes. If the value of the asset appreciates, there could be serious consequences. Your children will not receive the tax break that they would if they had received the assets through your estate. This is another reason why it is so important to carefully plan any transfers. Continue reading ‘Transfer Assets For Medicaid Eligibility’ »

While transferring assets is a great way to protect your assets and gain eligibility for Medicaid, there is a major disadvantage to asset transfers. When you transfer an asset, you basically give it away. This means that you no longer have control over that asset. Even when you transfer an asset to a trusted family member, they can run the risk of losing the asset or spending it for their own behalf. A better solution is to place the asset in an irrevocable trust. A trust is a legal entity in which one person is named a trustee. The trust holds legal title to the assets. Those who benefit from the trust are known as the beneficiaries. The named trustee must follow all rules associated with the trust. In some cases, the assets in the trust can be counted against Medicaid resource limits. This is why it is imperative to be aware of all rules and regulations regarding trusts and eligibility for the program.

It is also important to know the difference between an irrevocable and a revocable trust. A revocable trust can be changed or rescinded by the individual who created the trust. Since the trust can be changed, Medicaid considers this kind of trust to be an asset. All assets that are in a revocable trust will be considered when determining Medicaid eligibility. In short, when planning for the program, revocable trusts are not useful tools.

Irrevocable trusts of the “income-only” version cannot be changed after they have been created. This type of trust is usually drafted so that the income from the trust can be paid to you for life. The principal cannot be applied to benefit either you or your spouse. When you die, the principal is then paid to your heirs. This allows the funds to be protected while giving you the opportunity to use the income from the trust for living expenses. The principal in this type of trust is not considered a resource for the program’s asset evaluation purposes. However, if the situation changes and you move to a nursing home, the income from the trust will have to be paid to the nursing home. This is one of the disadvantages to an income-only irrevocable trust. Unless the trust is set up correctly, you are also not allowed access to the funds in a trust if you should need them for other purposes. This is why you should always have another source of funds aside from income from the trust. Continue reading ‘Irrevocable Trusts in Medicaid Asset Protection Planning’ »