Business ¢ents
Business ¢ents
by Dennis Roddy
Senior VP – Financial Services
Objectives of an Estate or Business Transition Plan – Needs Analysis
We all have an estate plan. In a sense, everyone has a plan even if they haven’t formalized a written plan. A person may have a will or a trust they have developed or another plan they have put in writing. For those that have not, the state you reside in provides a plan for you. Often the most important step is to determine the objectives of your estate or transition plan. There are many ways to transfer property before or after death; the key is understanding what you desire to accomplish. Advance planning benefits both you and your loved ones. The following items should be taken into consideration when formulating your plan.
Understand and decide:
- What happens to your assets at death when you do not have a written plan. Often individuals make assumptions that property will automatically go fully to their spouse or children and this may not be the case! State law dictates the order of distribution and you should be aware of the consequences.
- The way property is titled may specify how property is distributed, even if you have a written plan that may specify otherwise.
- Evaluate the probability of death versus the effects of death. Often a younger person may have less probability but the impacts upon others, such as minor children or as labor for a family farm, may have significant impact.
- Whether there is need to maintain security of minors or elderly care. This may require different planning components such as adequate guardians, nursing home insurance or the ability for others to sell assets.
- If maintaining control is an objective. There are many ways to maintain control of a family business while implementing a transition plan.
- In agriculture we often use the word equitable versus equal when transitioning or passing on a family farm or ranch. Some family members may have contributed more to the immediate success of the business through labor etc. and thus the approach may be more targeted towards fairness instead of equal division.
- Do you need a plan that allows flexibility and also can address unforeseen circumstances, such as disability or injury?
- Do you have a potentially taxable estate and wish to minimize estate or inheritance taxes? Estate taxes can be very high but planning ahead can often avoid these taxes. Also a good plan will address inflation of property values at least in the short run.
- Do you wish for your estate to not go through probate and be disclosed as a public record? A trust is one example of how you can avoid this process and issue.
These are a few of the needs analysis questions that should be considered when determining your own objectives. If you would like additional information with any of the above information, please call one of our offices so that we may direct you to a Frontier Farm Credit Specialist who can assist with your particular situation.
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