Smiling family of five standing in a sunny meadow.

It’s Planning Season

To have a successful farm, thoughtful planning must be done every season. Your life is no different. To properly prepare for the next season in your life and the lives of your loved ones, you need a well-executed estate plan. When crafting a foundational plan to protect yourself, your loved ones, your business, and your legacy, consider the following planning tools.

Revocable living trust. A revocable living trust is a tool in which a trustee is appointed to manage the accounts and property that you transfer to the trust for the benefit of one or more beneficiaries. To fund the trust, you change the ownership of your accounts and property to your name as the trustee of the trust. Typically, you serve as the initial trustee while you are alive and well, and you are also the primary beneficiary. If you become incapacitated (unable to manage your affairs), the backup trustee steps in and manages the trust for your benefit with little interruption and less potential for costly court involvement. Upon your death, the backup trustee manages and distributes the money and property according to your instructions in the trust document, again, usually without court involvement. Because the accounts and property are deemed to be owned by the trust and you have already determined what will happen to them, probate is not needed. A specifically crafted trust has the additional benefit of protecting your precious asset (the farm) from your beneficiaries’ creditors.

IMPORTANT: Work with an experienced estate planning attorney to ensure that any trust created and funded with farming assets (real estate, equipment, etc.) is structured in a way that does not disqualify you from or reduce any government farming subsidies you could be receiving.

Financial power of attorney. A financial power of attorney is a written document in which you appoint a person to handle various financial and property transactions on your behalf when you are alive but cannot handle them yourself. This can include signing contracts for you, making deposits into your bank account, managing property, paying taxes, and opening new accounts for you. The specific powers granted to an agent under a power of attorney will depend upon your wishes and what you list in the document itself. Also, depending on your state law, you may be able to dictate when your chosen agent can step in and act on your behalf. If your land, equipment, and associated bank accounts are in your name only, it is incredibly important to have this tool in place so someone has the authority to maintain your business and associated transactions should you be unable to.

Medical power of attorney. Farming can be a very strenuous career. Having a medical power of attorney in place is, therefore, crucial. This document allows you to name an individual to make medical decisions on your behalf in the event you cannot. While this power is applicable only if you are incapacitated or otherwise unable to communicate your own wishes, it will save your family a great deal of time and money by avoiding the court process of having a judge appoint someone to make decisions for you.

More-advanced planning tools. Depending on the value of everything you own (including your farming operation), you may need to include more-advanced tools in your estate plan. We can craft a plan that may reduce the amount of state or federal estate tax owed at your death, offer additional liability protections, or provide liquidity to address your unique situation.

We understand how important your farm and family are to you. We want to help ensure that you are properly protected and that everything is in place to properly transition your farming legacy to the next generation. Call us to schedule an appointment so we can evaluate your unique situation and craft a plan to help ensure that your legacy will be a lasting one.

Not Just Death and Taxes: 5 Essential Legal Documents You Need for Incapacity Planning

Comprehensive estate planning is more than your legacy after death, avoiding probate, and saving on taxes. Good estate planning includes a plan in place to manage your affairs if you become incapacitated during your life and can no longer make decisions for yourself. 

What happens without an incapacity plan?

Without a comprehensive incapacity plan in place, your family will have to go to court to get a judge to appoint a guardian or conservator to take control of your assets and health care decisions. This guardian or conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding. There are two dimensions to decision making that need to be considered: financial decisions and healthcare decisions.

Finances during incapacity

If you are incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and investments still need to be managed.

Healthcare during incapacity

If you become legally incapacitated, you won’t be able to make healthcare decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).

You must have these five essential legal documents in place before becoming incapacitated so that your family is empowered to make decisions for you:

1. Financial power of attorney: This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.  

Financial Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after you have been declared mentally incapacitated. There are advantages and disadvantages to each type, and we can help you decide which is best for your situation.

2. Revocable living trust: This legal document has three parties to it: the person who creates the trust (you might see this written as “trustmaker,” “grantor,” or “settlor” — they all mean the same thing); the person who legally owns and manages the assets transferred into the trust (the “trustee”); and the person who benefits from the assets transferred into the trust (the “beneficiary”). In the typical situation, you will be the trustmaker, the trustee, and the beneficiary of your own revocable living trust. But if you ever become incapacitated, your designated successor trustee will step in to manage the trust assets for your benefit. Since the trust controls how your property is used, you can specify how your assets are to be used if you become incapacitated (for example, you can authorize the trustee to continue to make gifts or pay tuition for your grandchildren).

3. Medical power of attorney: This legal document, also called a medical or health care proxy, gives your agent the authority to make healthcare decisions if you become incapacitated.

4. Living will: This legal document shares your wishes regarding end of life care if you become incapacitated. Although a living will isn’t necessarily enforceable in all states, it can provide meaningful information about your desires even if it isn’t strictly enforceable.

5. HIPAA authorization: This legal document gives your doctor authority to disclose medical information to an agent selected by you. This is important because health privacy laws may make it very difficult for your agents or family to learn about your condition without this release.

Is your incapacity plan up to date?

Once you get all of these legal documents for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them. Instead, your incapacity plan must be reviewed and updated periodically and when certain life events occur such as moving to a new state or going through a divorce. If you keep your incapacity plan up to date and make the documents available to your loved ones and trusted helpers, it should work the way you expect it to if needed.

Why a Trust Is the Best Option for Avoiding Probate

As Ambrose Bierce once darkly observed, “Death is not the end. There remains the litigation over the estate.”

Ideally, when someone passes away, the paperwork and material concerns associated with the estate are so flawlessly handled (thanks to excellent preparation) that they fade into the background, allowing the family to grieve and remember in peace.

In fact, the whole business of estate planning – or at least a significant piece of it – is concerned with ease. How can assets and legacies be transferred to the next generation in a harmonious, stress-free, fair process?

To that end, one primary goal of many people is to avoid the complications and costs involved with probate.

There are many “tools of the trade” that a qualified attorney can use to keep your assets out of probate – for example, establishing joint ownership on bank accounts and real estate titles, designating beneficiaries for life insurance policies and certain accounts, and so on. However, setting up a revocable living trust is quite often the best, most comprehensive option for avoiding probate. Let’s discuss why this is true.

What is a trust?

Often touted as an alternative to a will, a trust is a legal structure that permits management of your assets by a trustee on behalf of your beneficiaries. A living trust is established while you are still alive, as opposed to being created upon your death. You can be the trustee for your own living trust until you are no longer able to manage your financial affairs or pass away, at which point the responsibility for managing the trust passes to someone you designate as a successor trustee.

How does a trust help you avoid probate?

The purpose of probate is to transfer property ownership for all assets that were listed in your name when you passed away. A trust can bypass this process completely because your assets are transferred to the trust while you are still alive. Therefore, when you die, there’s nothing that needs to be transferred by the probate court (everything is already in your trust). Furthermore, a trust can cover virtually any type of asset, from real estate to vehicles to stock to bank accounts. When a trust is structured correctly with the help of an experienced estate planning attorney, your entire estate can stay out of probate court entirely. This process not only limits court costs, but it also maintains the privacy of your financial records while enabling your beneficiaries to enjoy the benefits of the trust without disruption or delay.

Establishing a trust can be a bit complicated, and the process can cost a bit more upfront than a will; however, if you’re willing to invest a little more up front, a trust can be your best option for avoiding probate later. 

That said, as wonderful as revocable living trusts can be – and we’ve only scratched the surface of their exciting features in this short post – always bear in mind H.L. Mencken’s warning that “For every complex problem there is an answer that is clear, simple, and wrong.”

The key to planning effectively to minimize the likelihood of a drawn out, contentious, expensive process is to work with highly qualified, trusted people. Find a lawyer who genuinely cares about you and your family and who knows how to forge the right strategy for you and your family. Give us a call today to learn more about your next steps to get the peace of mind you deserve.

Joe Paterno’s Will

After Joe Paterno's death, in an unusual move, the probate court entered an order sealing his Will from being released to the public. This was very unusual because when a Will is filed with the probate court it generally becomes part of the public record. Anyone who wants could march down to the court and review the Will and even make a copy. However, the court later rescinded its order and opened it up for public inspection.  See an article on this here.

From this article is appears that Mr. Paterno did his planinng around a revocable trust. The Will provided his wife was to receive all tangible personal property such as furnishings, artwork, and similar items. However, the Will provided that all other assets were to pass to his revocable trust which remains private. A trust typically does not have to be filed with the probate court and thus will not be made public. We do not know who the beneficairies are of the trust but we can surmise Mr. Paterno set up a plan to reduce estate taxes and provide for his wife and children.

If you value keeping your affairs private consider using a revocable trust as part of your planning. Trusts are not necessarily for everyone and you should seek competent legal counsel to decide if a trust would benefit you and your loved ones.