Estate planning is a difficult process for families. There are a multitude of factors for families to consider. Many times this process can be overwhelming. Tiffany Dowell Lashmet, agricultural law specialist in Amarillo, recently provided some clarity to program attendees at the Southwest Beef Symposium.
Step One: Create a Flight Plan for documents
Lashmet advised participants to have one location where all documents are gathered. This folder could include: estate planning documents, IRA/401K, retirement plans, insurance policies (life and health), bank account numbers, safety deposit box information, birth certificates and marriage licenses, personal property and assets, among other things.
“Put this somewhere safe and tell someone about it,” she said. “Don’t lock it away and where nobody knows where it is or how to access it.”
Step 2: Communicate with Interested Persons
“It only leads to extra problems if you don’t communicate with your family and potential heirs to determine what their interest in the agricultural operation may be, “ Lashmet said. “I recommend you have a sit-down discussion. This allows you to gauge their interest and determine who wants what, what level of involvement they might be interested in, and what their goals and values are.”
Include other stakeholders also, including family members or other business sponsors, and identify the goals everyone has. “Perhaps the goal is to keep the ranch in the family, or perhaps the goal is to maximize capital gains taxes when land will be sold or to ensure qualification for Medicaid,” Lashmet said. “Understanding the goal is key because that will instruct the best plan for the individual.”
Naturally, Everyone’s goals are going to be different.
Step 3: Develop a Business Succession Plan
“We talk a lot about who will own the land, but rarely do we talk about who will be making the management decisions and who is taking over operations,” Lashmet said. “Determine what training or experience they might need and make a plan for it. Make sure that someday when it is their job, they are not starting from scratch.”
What new roles will have to be created or changed? It can be hard for a working family member to run a total operation that someone else ran in the past and maintain their current employment.
Step 4: Develop an Estate Plan
An estate plan should include a will and power of attorney. “I don’t advise you go buy a fill-in-the-blank will,” Lashmet said. “It is the best to work with an attorney licensed in your jurisdiction to draft a will.”
“In Texas, it must be handwritten or typed with two witnesses. And don’t forget to revise your will and your beneficiaries when you have life changes.”
One example given of this is outlined where a man took out a life insurance policy and designated his girlfriend as the beneficiary. He later married someone else and upon his death the wife went to cash in the policy, but found out he never updated the beneficiary. His ex-girlfriend collect the money even though it wasn’t intended.
Step 5: Draft and Implement the Plan
“This is where I really do recommend you consult with an attorney to help analyze the best approach and draft documents,” Lashmet said. “This is important enough that it is worth the expense. It may also be prudent to include your accountant or other tax professionals in this process.”
An estate plan and a flight plan of documents can make the transition process much easier and less expensive for family left behind.
For more information, Lashmet offers several extended episodes of her Ag Law in the Field podcast, which cover a variety of topics.
Zach Davis is the county extension agent for Texas A&M AgriLife Extension-Denton County.