Mesa, AZ 85213
Phoenix, AZ 85004
Gunderson, Denton And Peterson Office Locations
View View Gunderson, Denton And Peterson Locations in a larger map
Planning for the Future with Gunderson Denton
Three Estate Planning Mistakes Farmers and Ranchers Make that Make Them Losing Their Cash and How to Avoid Them
Farming or ranching is more than a means of livelihood – it is about preserving a legacy and unique way of life. Unfortunately, many farmers and ranchers don’t fully protect their legacy with an up to date estate plan. An out of date or inadequate estate plan could result in a farm or ranch that has been passed down for generations ending up being sold and converted into non-agricultural use. Sadly, a lack of planning can cut a legacy short and end a family’s unique lifestyle choice if you need cash today because you are in this situation you should take the time to read this article.
The subdivision of the family farm or ranch into residential lots or plowing under the soil to build the next mall or office building can be avoided. In this issue you will learn about three common estate planning mistakes farmers and ranchers make and how you can help to avoid them.
Mistake #1 – Failing to Plan or Failing to Update an Out of Date Plan
Farmers and ranchers have complex estate planning needs. They may have children who want to continue the farming or ranching business and children who do not. As a result, they will be forced to decide who inherits the land, the equipment, the livestock, and other assets, while trying to keep things fair and equal. This makes it difficult for many farmers and ranchers to decide what to do, which may result in no estate plan being created at all. On the other hand, some farmers and ranchers may have an estate plan but have failed to talk to agricultural health and safety consultants which results in them violating health and safety regulations leading to hefty fines.
Planning Tip #1
Clients who own a farm or a ranch and already have an estate plan need to understand the importance of keeping the plan up to date as life events happen (births, deaths, marriages, divorces, illnesses, bankruptcies, lawsuits, jackpots) and laws are modified or repealed. If you are going through a divorce and have kids, you will want to hire Paterson & Dowding family lawyer to help settle child custody. As the expert who understands the changing dynamics and wealth of the family, you are in an ideal position to assemble a team of experts (including attorneys, accountants, bankers, and insurance specialists,) who can help the client update their plan so that it will work for their new situation.
Mistake #2 – Relying on Joint Accounts and Beneficiary Designations
Farmers and ranchers may believe that the easiest way to plan their estates and avoid probate is to own property in joint names with family members, establish payable on death (POD) or transfer on death (TOD) accounts, and name family members as beneficiaries of their life insurance policies and retirement accounts. Relying on joint accounts and beneficiary designations is a huge mistake on many fronts.
For example, enrolling jointly owned farmland or ranch property in programs administered by the U.S. Department of Agriculture may result in subsidies being left on the table. In addition, farmers and ranchers are giving up control of their real estate by owning it directly with others. Business entities (corporations, partnerships, and limited liability companies) or trusts are the better options for maximizing subsidies, minimizing liability, and retaining control.
Some farmers and ranchers work with a probate lawyer and take the time to make an estate plan. It’s important to note that sometimes even when doing so, the use of joint property with rights of survivorship, POD or TOD accounts, and individual beneficiary designations on life insurance policies and retirement accounts can frustrate the intent of the estate plan. This is because these assets pass outside of the will or trust. In addition, outright distributions will not be protected from creditors, predators, and lawsuits.
While joint and beneficiary assets will avoid probate, these assets will still be included in the taxable estate. This may create an estate tax liability at the state and/or federal level without a well-planned means for payment since the assets will go directly into the hands of the beneficiaries. In turn, other property that passes through intestacy or a will or trust will be used to pay the estate tax bill, potentially creating unfair and unequal inheritances. You can learn here some ways on how you can handle this situation with the help of some reliable probate lawyers.
Planning Tip #2
How property is titled often dictates who inherits it. Farmers and ranchers need to coordinate assets held in business entities and trusts with assets that are jointly owned or pass under a beneficiary designation. Otherwise intended heirs may end up with nothing and estate tax bills may cause unintended consequences.
Mistake #3 – Overlooking Liquidity Needs
Incapacity and death are expensive. Aside from day-to-day family expenses and medical bills, attorneys, accountants, trustees, and other administration expenses need to be paid. To make matters even more challenging, federal estate taxes are due within nine months of death, and state death taxes are also typically due within this same time frame.
Where will the farming or ranching family get the cash to pay these expenses? Farmland is illiquid as is farming equipment. Without properly planning for immediate and long-term cash needs, families may be forced to quickly sell land and equipment at a reduced rate.
Planning Tip #3
You are in the unique position to help farming and ranching clients assess their liquidity needs and create a plan for managing debt and expenses upon incapacity or death. You can assist with securing lines of credit and the proper amount of disability insurance, long-term care insurance, and life insurance. You can also collaborate with a estate planning attorney to add life insurance trusts, entity planning, and part gift/part sale arrangements in exchange for a note or private annuity.
Read more here on how you can save a sufficient amount of money while buying well maintained and working farming machinery.
Takeaways for Farmers and Ranchers
Farmers and ranchers have unique circumstances that require specialized estate planning solutions. You, as the advisor to farming and ranching clients, are in the perfect position to help them create and maintain a plan that will preserve their legacy and way of life. Our estate planning lawyers are experienced with helping farmers and ranchers achieve their estate planning goals. Please call us if you have any questions about this type of planning and to arrange for consultations for your farming and ranching clients.
*This article is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
1930 N Arboleda #201
Mesa, Arizona 85213
40 N Central Ave #1400
Phoenix, AZ 85004
GDP Estate Planning Blog
Is There an Income Tax Time Bomb Lurking in Your Estate Plan?
Estate Planning for Young Families
Estate Planning Practice News Update: Brent Gunderson now licensed in both AZ and NV
The Shocking Truth About Asset Protection Planning
Three Estate Planning Mistakes Farmers and Ranchers Make and lose their cash and How to Avoid Them
Arizona Is One Of Only A Handful Of States That Offer A “Transfer On Death” Designation For Automobiles
Does Your Family Member Have Capacity To Create A Will?
How Clients Can Easily Integrate Asset Protection Trusts into Their Estate Plans
5 Things to Consider for Flexible Trusts to Update Your Estate Plans
I Created A Will With A Form I Found On The Internet. Do I Need To Worry About Its Validity?
Five Ways to Make Trusts More Flexible
And Then There Was One: When Removal Clauses Backfire
Why You Should Avoid DIY Estate Planning
How to Create a Successful, Multigenerational Wealth Transfer Plan
How to Become a Multigenerational, Purpose-Driven Advisor
Trust-Focused Strategies for Reducing Income You or Your Trustee Can Use Now
Lessons from the Estate of Tom Clancy: Careful Drafting Matters
The 4 Estate Planning Documents Everyone Needs
Asset Protection Planning for the Modern Client
What Legacy for Your Children
How to Protect Inherited IRAs After the Clark v. Rameker Decision
How Important is it to be Clear When Drafting Your Last Wishes? The Casey Kasem Example.
The Most Important Parts of Estate Planning Can’t Get Legislated Away
Three Top Reasons to Update Your Estate Plan in 2014
The Importance of Revising an Estate Plan After Divorce
Charitable Giving After ATRA
Does the American Taxpayer Relief Act of 2012 Affect You?
Why You Should Review (and Update) Your Estate Plan
Estate Planning for Blended Families and Stepchildren
Estate Planning–Securing the Future for Yourself and Loved Ones
Estate Planning Law at Gunderson, Denton & Peterson, P.C.
Estate Planning Moves to Make Before the End of 2012
The Estate’s Responsibilities to Creditors and the Basics of Transferring the Estate
Estate Planning: What are the risks of creating your own plan?
Arizona Business Law
Arizona Business Lawyers
Link about our Arizona Business Lawyers.
Arizona Collections Law
Arizona Collections Lawyer
This link talks about our collection lawyers in Arizona.
Arizona Employment Law
Arizona Employment Lawyer
This link is about our employment lawyers in Arizona.
Arizona Estate Planning
Arizona Estate Planning Lawyer
This link is about our estate planning lawyers in Mesa Arizona.
- Mesa Estate Planning Attorney
This link talks about our estate planning lawyers in Mesa Arizona.
Arizona Franchise Law
Arizona Franchise Attorney
This link is about our Arizona Franchise Attorneys.
Arizona Immigration Law
Arizona Immigration Attorney
This link is about our immigration attorneys in Mesa Arizona.
- Arizona Visa Lawyer
This link is regarding our Arizona Visa Lawyers.
- EB-5 Immigration Visa
This page talks about EB-5 immigration visas.
- Investor Visa
This page talks about investor visas by our immigration lawyers in Mesa.
- Mesa Arizona Immigration Lawyer
This link is regarding our immigration attorneys in Mesa.
Arizona Litigation Matters
- Arizona litigation lawyers
This link is about our litigation lawyers in Mesa Arizona.
- Mesa Litigation Attorney
This link talks about out litigation lawyer in Mesa Arizona.
Arizona Probate Law
Arizona Probate Lawyers
This link is about our Arizona probate lawyers.
Arizona Real Estate Law
Arizona Real Estate Lawyers
This link is about our real estate lawyers in Mesa Arizona.
- Phoenix Real Estate Lawyer
This link is about our knowledgeable real estate attorneys in Phoenix, Arizona.
Mesa, AZ 85213