Barriers To Estate Planning

Estate planning can freeze you in your tracks. It is complicated. It is legal. It requires tough decisions. Most of all it projects yourself forward in time beyond your lifetime. Not exactly a fun topic to think about, let alone take action.

With the help of Michael Baron, an estate planner from Bismarck, North Dakota, I compiled a list of psychological barriers in estate planning.

1. Avoidance. Some farmers refuse to deal with their own mortality. They don’t get sick. When they do, they don’t go to the doctor. They think they are immortal and indispensable. That is foolish when the average life expectancy for males is 73. It is as if they refuse to make plans so they can prevent the inevitable.

No decision is a decision. Instead of doing the hard work of thinking through an estate plan, a farmer is saying, in effect, that the state or provincial government can do a better job of dispersing the estate according to their predetermined laws. Then the government gets to keep a big hunk of it.

Dying and leaving an estate without a will can be a horror story for the next generation. It will mix anger and legal distractions into their grieving and their memories. They don’t need a honor story to tell their grandchildren. Leave a legacy of love untainted by your stupidity or denial.

2. Not planning to retire. People who are not good at retirement planning aren’t good at estate planning. Better and earlier transitions can be made if when people are moving toward personal goals and a future they are excited about.

Someone who plans for retirement with make decisions about succession, delegation and better long term decisions about continuity of the business than by someone who is hanging on. Passing on assets and ownership will take place over a longer period. The business sense and trust of the next generation to manage the remaining retirement assets will be enhanced.

3. Staying in control. This is a throwback to a different era when the father was lord and master of his patriarchal domain. These are often perfectionist, workaholic fathers who see the farm as their own personal aggrandizement.

They use the land as a whip to control the behavior of their farming children. By being deliberately vague and indecisive about estate plans, they keep the next generation beholden to them and too fearful to challenge their authority or thinking.

4. Deciding what is fair is a tough call. It takes a huge amount of assets to farm and the return on investment is paper thin. The farm is a business, not a legacy.

By leaving a business to several heirs, the ability of the farming heir to stay in business is destroyed. Gone are the days of the benevolent siblings who sit by passively and let their sibling farm.

The on-farm heirs want cash flow and long term investment. What is their farm labor worth? Should siblings be looking over their shoulder at their standard of living and questioning their business decisions?

The off-farm heirs want liquidity and short term returns on investment. The farming and non-farming heirs are in a conflict of interest situation. There probably aren’t enough cash revenues to buy out the other heirs equitably.

Fair is not equal. Make an early decision to leave the core assets of the business intact. The farm is not an asset to be given away. Farming is about sharing a career with a son or daughter and their family. They have been willing to take the same risks and put in the same sweat equity as the parents. In giving a farm to non-farm heirs, the gift has been earned, at least partially, by someone else.

Commitments need to be honored. It is a tragedy when the farming children are left in the lurch by an "equitable" distribution of assets. Assets are not love. The estate can be divided more equally if (I) there are enough non-farm assets for the non-farm heirs or (2) the farming children are already independent. Then the farm can be treated as another disposable asset to be divided equally.

5. Harmony now and disharmony later. In a family that loves harmony, some people think that talking about estate planning is like walking in a mine field. There should be open, ongoing conversations about the estate Invite their ideas, feelings and special requests. What does each child want?

Have an open reading of the will with everyone present. Be prepared to explain the plan and be open to suggestions. Secrecy around estate planning will foster suspicions and resentments among the children after the parent is gone. Just because parents are not around to see it, doesn’t mean conflict won’t happen. If they hear it from their parent’s own lips, children will accept the fact that there was no undo influence.