Estate Plan Fundamentals for FarmersTax Professionals' Resource
February 18, 2013 — 1,258 views
After having worked hard at building assets using your farms and generating the agribusiness for your family, it is important for you to provide some kind of financial security to your family. So why not consider putting in the same amount of hard work to protect your family after your death. That is what the goal of estate planning is. After you, your kids would carry forward the business using the piece of land provided to them as per your choice. This was how the concept of multi-generation farms had evolved.
Understanding Estate Planning
Though some people are under the impression that estate planning needs to be done only by the rich, it is a good idea for just anyone to begin the estate planning process as early as possible. With a proper estate planning, an individual could even increase the size of their estates. The basic purpose of estate planning is to ensure that the money and assets get directed to the right people or more appropriately, the ones you choose. This way the property would be distributed in efficiently.
This hugely helps in minimizing the taxes as well. Estate planning is more advisable for farmers, as there would be acres of farms which might have to be directed to the right people to be looked after. The structure for most estate plans comprises either a will or trust. These can be considered as the two primary tools of estate planning.
Ideal time for Estate Planning
Most people would begin planning their estates at the time of retirement as per the normal curve of life. But waiting for this time is not the wisest decision. If you think that planning your estate is something that you could do leisurely, it might lead to some hasty decision making. Planning a better tomorrow now itself is always the best idea. Planning early, planning quite often, and being flexible can be termed as the three successful factors that result in effective estate planning.
The repercussions that result if you don’t follow the process of estate planning could be devastating. Larger estates mean larger tax. Payment of this estate tax might require liquidation of the assets. This may further generate capital gain tax. So the conclusion is that your family will succumb to the heavy taxes.
Transferring the Farm
Some goals of estate planning can be summarized as:
- Transfer of estates and assets to the next generation in an orderly manner and the most efficient way.
- An optimal solution for minimizing taxes.
- A way to preserve the farm, and continue the legacy of the family’s agribusiness.
- Treating the younger generation in a fair manner.
How do Trusts Help?
Trusts are the most popular tools for estate planning. The farm planning has to imperatively use trusts in cases of special need heir/heiress, in case of minors, in the cases of vast estates worth more than $10-15 million, and also in case of real estates if present in more than one state.
Finally, communicating effectively to your spouse, children, and most importantly, a legal or tax professional would help greatly in estate planning.