Succession Planning: Use the Tools

There are four basic, essential documents that everyone—including farmers—should have that can guide a smooth transition from one generation to the next. More often today, a fifth set of documents may come into play with complex and increasingly valuable farm businesses.

By Des Keller

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There are four basic, essential documents that everyone—including farmers—should have that can guide a smooth transition from one generation to the next. More often today, a fifth set of documents may come into play with complex and increasingly valuable farm businesses. They include:

 

  1. A will. This is a basic statement as to how your assets shall be distributed upon your death.
  2. Durable Power of Attorney—for financial decisions. This document gives someone else the ability to make financial decisions on your behalf in case you become incapacitated by accident or illness.
  3. Durable Power of Attorney—for health care. This directive gives someone the ability to make health care decisions on your behalf if you are unable. This person may be different from the person having your power of attorney for financial decisions, but does not have to be.
  4. Revocable Living Trust. While this trust doesn’t move assets out of an estate (because it is revocable), it can help avoid probate court in the event of a need—due, for instance, to death—to quickly transfer assets quickly to heirs. For this reason, a revocable trust can allow heirs or managers to continue to run the business in the event of an emergency.
  5. Family limited partnership or family limited liability company, and even an irrevocable life insurance trust, may be needed to enable a smooth transition.

<< Read the full story, “Succession on the Farm: Working the Middle”