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Estate plans are only effective if up to date

As a farmer, your estate planning goals probably include avoiding the costs, delays and public disclosure of probate in your county court. A neighbor may have told you his estate plan is set up to avoid going to court. You may have experienced court probate after the death of a parent or other family member. You may just be wondering whether you should have a living trust.

The living trust has been highly promoted as the ultimate estate planning method. The living trust is effective for transferring an estate and minimizing the delays and expenses of administration. But it should be used only when it is the best method for your specific circumstances. Your attorney should also consider the other methods available in Wisconsin that can be used alone, or sometimes with a living trust, to expedite the transfer of your estate upon your death. The other non-probate alternatives include beneficiary designations, payable on death designations, transfer on death deeds, joint tenancy, survivorship marital property and non-probate transfer under a marital property agreement. Wisconsin is the only state that permits a married couple to transfer assets without probate through a marital property agreement.

Each of these methods, including the living trust, can assist your heirs in avoiding reporting requirements, publication notices and scheduling deadlines required in court probate. There are even situations when court probate is the best alternative. The best approach really depends on the assets held by you and your family situation.

A living trust is a written agreement created by you or you and your spouse during your lifetimes that may be revoked or amended by you, without the consent of any third party. You customarily name yourselves as the initial trustees. You, as trustees, retain control of the trust estate during your lives. You name successor trustees who continue management and distribution of the trust estate upon the death of the surviving spouse. The successor trustees are usually the same children or other individuals you would have named as personal representatives in your will.

We often recommend a living trust for a farmer or farm couple because their estate is comprised of substantial farm assets, the complexities of accounting for a farm estate and the special provisions that are necessary for the transfer of the farm to the next generation. A married farm couple will execute a marital property agreement classifying most of their property as marital property. Marital property, such as personal property and real estate, will receive a full step-up in basis (cost) to the fair market value on the first death and again on the surviving spouse’s death. That step-up in basis means assets can be sold for up-to-the-date-of-death value without income tax, or that depreciation can be taken on that stepped-up value, offsetting future farm income.

A couple’s marital property agreement can provide for non-probate transfer of assets to a living trust upon the death of either spouse, allowing funding of the living trust at death, rather than during life. Alternately, the marital property agreement can provide for non-probate transfer of assets directly to the surviving spouse or to the next generation.

You should review your present estate plan in light of your current financial and family situation and current goals and objectives. Will your “on farm” heirs be able to acquire essential farm assets at a price and on terms the farm can cash flow given the inflated value of farm assets and limited farm income? Have you treated “off farm” heirs fairly? Do the beneficiary designations on your individual retirement accounts and other retirement plans and life insurance coordinate with your living trust or will? Have you adequately planned to avoid estate taxes?

You need to keep your estate planning documents up to date. Those provisions must deal with your current farm and family situation and current laws, not the situation and laws that existed when you wrote your last will.

Twohig is a partner in Twohig, Rietbrock, Schneider & Halbach S.C. in Chilton. The firm specializes in ag law.

This article published in the June, 2010 edition of WISCONSIN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2010.