Farming and ranching is more than just a livelihood; it is about preserving a legacy and a way of life. Unfortunately, many farmers and ranchers fail to create a comprehensive estate plan—or any estate plan at all. There are several estate planning mistakes for ranchers to avoid in order to protect their legacy. Without a proper estate plan, the family farm or ranch passed down for generations can be sold and converted to nonagricultural use, cutting the family’s legacy short and ending their unique lifestyle.
Below are three common estate planning mistakes farmers and ranchers make and how to avoid the common errors in estate planning.
As a farmer or rancher, you have distinct estate planning needs. You may have children who want—or do not want—to continue the farming or ranching business. You must consider who should inherit your land, equipment, livestock, accounts, and other property while trying to keep things fair and equal. As a result, you may be unable to decide what to do and end up doing nothing.
Fortunately, many estate planning options are available that will help you fulfill your ultimate goals for the future. To preserve what you have and leave it to the next generation, you need to work with a team of experts, including attorneys, accountants, bankers, insurance specialists, and financial advisors, who are familiar with the nuances of estate planning mistakes and rancher-specific issues.
You may believe that the easiest way to avoid having your loved ones go through the probate process at your death is to own your property jointly with them. However, transferring all or part of your farm during your lifetime may have unintended consequences. For example, farmland or ranch property jointly owned and enrolled in programs administered by the United States Department of Agriculture may result in subsidies being left on the table. In addition, joint ownership causes you to give up total and unilateral control of your real estate.
Someone added as a joint owner to your account, or property can make critical decisions about it:
Joint ownership errors are common estate planning mistakes for ranchers as “undoing” these arrangements can have significant costs and tax implications.
Holding real estate in the name of a business entity (corporation, partnership, or limited liability company) or a trust is a better option, as it allows you to minimize liability and retain control.
Incapacity (the inability to manage your own affairs) and death are expensive life events and often require cash to pay expenses. However, farmland and farming equipment are not easily converted to cash. Without properly planning for immediate and long-term cash needs, your family may be forced to sell land and equipment for pennies on the dollar quickly.
You have several options when creating a plan to manage debt and expenses during your incapacity or after your death. Financial advisors, bankers, and insurance professionals can assist with securing lines of credit and the proper amount of disability, long-term care, and life insurance to prepare for the unexpected. Attorneys can assist by creating life insurance trusts, business entities, and other more complex plans, addressing potential estate planning mistakes.
We understand that farmers and ranchers require specialized estate planning solutions. A team of advisors, including attorneys, accountants, bankers, insurance professionals, and financial advisors, can assist you in creating and maintaining a plan that will preserve your legacy and unique way of life. Our firm is experienced in supporting farmers and ranchers in achieving their estate planning goals. Please call our office if you have any questions about this type of planning and to arrange for a consultation on avoiding estate planning mistakes.
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14425 Falcon Head Blvd
Bldg E-100
Austin, TX 78738
