(765) 470-7090 polly@dobbslegal.com

Down on the Family Farm

How to Avoid Five Common Estate Planning Mistakes May 2, 2013 By Polly Dobbs, Attorney, Dobbs Legal Group, LLC I’m a farm girl and an estate planning attorney. So naturally, I’m passionate about helping farm families efficiently transfer ownership of their land, buildings and equipment to the next generation. Too often I sit down with farming clients who misunderstand the estate planning process. Their misunderstanding is usually the result of overhearing inaccurate information. Perhaps they’ve heard a couple neighbors discussing death taxes and loopholes at the grain elevator and pick up some more chatter at the local diner. This secondhand advice, while perhaps well-meaning, will inevitably become their estate planning downfall.   Here, we explore five common examples of estate-planning-gone-wrong for farmers.   1. “I’m going to give away the remainder interest, but hold on to the life estate to retain control and income stream.” The only goal this plan accomplishes is avoiding probate administration. Retained interests such as this cause 100 percent of the value to be included in the gross estate of the life estate holder at death for Federal Estate Tax purposes. This is not a good plan for someone trying to minimize death taxes. 2. “I plan to title my property jointly with my children and their spouses so that it automatically passes to them at death.” Yes, this avoids probate; however, it also puts the farm squarely within the marital estate of your child’s potential future divorce. Leaving your child outright ownership could make the family farm susceptible to claims by the child’s creditors and subject to division by a divorce court in the...