For many people, and in particular those with substantial agricultural assets, the concept of estate planning and succession planning can be difficult to comprehend. You know it is important; you can’t avoid the concern; and you probably spend a bit of time worrying about it. However, issues such as choice of business entity (with unfamiliar acronyms such as LP, LLC and S-Corp), and transfer taxes such as gift taxes, estate taxes, and generation-skipping transfer taxes?not to mention property taxes and income taxes?are common, and soon, the issue seems too big to confront.
It’s not?or, at least, it doesn’t have to be. Don’t let fear and lack of clarity prevent you from getting started. What do you need to know to start? Consider the following:
- Determine whether you need an estate plan. Everyone needs basic estate-planning documents, including a Durable General Power of Attorney, an Advance Health Care Directive, and a Will. If you don’t have them yet, you should get them. If you own real property, your family or beneficiaries would also benefit by establishing a Revocable Trust to avoid probate at your death. It is that simple: You need these documents.
- Find a qualified estate-planning attorney. The documents mentioned above are not one-size-fits-all; that is, the provisions included in the documents should be tailored to your needs. This is not the time to do it yourself or to work with any attorney who agrees to take your money. The legal ramifications for you and/or your family are great. It doesn’t pay to be ?penny wise and pound foolish.? Ask your friends and other advisors; find someone you trust and with whom you can communicate comfortably. You don’t need to be intimidated, or baffled, or directed; your estate-planning attorney needs to fit you, not the other way around.
- Create your basic estate plan. Now that you have an attorney, the next step is to consider alternatives and to create a basic estate plan, including, at least, a Durable Power of Attorney, an Advance Health Care Directive, a Will and a Revocable Trust. Depending on your family situation, your revocable trust may include one or more subtrusts and simple or complicated provisions for management of your assets. No need to figure this part out now; choose your attorney and rely on his or her expertise to guide you.
- Advanced Estate Planning and Business Succession Planning. Once your basic plan is in place, and you’re more familiar with the process, your attorney and the terminology involved, consider whether you need advanced estate planning, or more formalized business succession planning. Many factors play into the analysis, which may include family meetings and consideration of family legacy issues. Sometimes, this step can be combined into the step listed in item 3. The analysis can be made more complicated by discussions of entities, irrevocable trusts and family succession; on the other hand, this step may be unnecessary due to your own circumstances and the generous and relatively predictable state of the transfer tax laws. However, in most cases, separating out the basic planning from consideration of more advanced plans enhances your own understanding of the issues and alternatives. If you think it is too complicated, you aren’t likely to understand and make the best decisions for you or your family. You also aren’t likely to follow through.
- Maintain and update your plan. ?It’s a bad plan that admits of no modification? as the maxim goes, and this applies to your estate plan. Your plan will need to change as your life changes; you should revisit your plan in light of major life events such as marriages, births, deaths, and changes in wealth. Federal transfer tax laws change, and your plan should also be reviewed to ensure that tax laws haven’t rendered some portion of the plan inadvisable.
Going from zero estate-planning documents to completion of an advanced estate plan in one step is not required, practical or even advisable. Start small?but start!!
Paulla?Hyatt-McIntire is a Certified Specialist in Estate Planning, Trust and Probate Law* and provides quality legal counsel for all levels of complexity in estate planning, trust administration, probate, special needs trusts, elder law, and business succession and tax planning. In addition to Paulla’s experience in law, she spent nine years as an elementary and middle school teacher for the Yuba City Unified and Franklin Elementary School Districts. Paulla is married to Brad McIntire, and their family includes daughters Jackie and Katie and son Zach.
*State Bar of California Board of Legal Specialization
This article appeared in the April 2015 issue of Crop Talk magazine.