Keeping up with life’s changes is part of estate planning. For those who own farms, ranches, or other family businesses, trusts and estate plans created years ago are unlikely to serve the family today, says a recent article from Successful Farming, “How to Handle an Outdated Estate Plan.” Adding to the issue, adult children may not always agree with the plan their parents created.
The solution begins with a consultation with an estate planning attorney experienced with farms, ranches, or family businesses. They can see the whole picture in a way owners often cannot. The process begins, as it does for non-business owners, with an inventory of the family’s assets. The nextstep is to determine the family’s goal: keep the farm in the family and sell it to fund the owner’s retirement or another option. Review the old estate plan to see if it’s relevant. It’s better to address the issue and create a new estate plan.
Depending upon what kind of trusts were created in the past, they may still work with the updated estate plan. An estate planning attorney can help restate the trust’s provisions if it’s a revocable trust. If it’s an irrevocable trust, it may need to be decanted and “poured” into a new trust if your state’s laws permit this.
What ownership entities were created by the original estate plan? If the parents hold controlling interests, they can modify operating agreements to update the plan. A centralized management system and exit strategy can be created as long as the numbers work.
Life insurance policies’ expiration dates need to be reviewed in case something can be done with them before they expire. If there is a cash value, it might be used to purchase a better policy. Cash benefits from life insurance are a means of expanding operations, funding buyouts, or equalizing assets between heirs.
Fluctuations in land value mean that farmers, ranchers and real estate owners need to change their purchase prices. Review the numbers periodically to ensure that the valuation model and funding strategies still work. It may be wise to set a fixed or maximum price, depending on the situation.
Getting children to agree with their parents’ plan for the future takes more than parents explaining the plan. Schedule a family meeting with advisors, including an estate planning attorney, accountant and financial advisor, to review the reasoning behind your decisions and how they will benefit. Having non-family members present for the discussion can often take the emotions out of the discussion, changing the dynamic and allowing the next generation to feel empowered for the future.
The worst option is not to act on an outdated estate plan. The cost and stress of leaving a thriving enterprise to the next generation without an estate plan or a succession plan could leave the family with no choice but to sell the business.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Successful Farming (Nov. 7, 2024) “How to Handle an Outdated Estate Plan”
