Developing farm succession plans takes perseverance

ROCK ISLAND, Ill. — An estate plan is not a one-and-done process. It is a good idea to review it from time to time.

“There is an overlap with estate, business and succession planning,” said Cari Rincker, principal attorney and owner of Rincker Law PLLC.

She talked about a succession planning survey she completed in 2020, and now is conducting a second survey about this process, during a presentation at the Women in Agriculture Conference organized by several Illinois county Farm Bureaus.

In her initial survey, 58 people responded and 46% of them were farmer landowners.

“Most of them were between the ages of 35 and 44, and I think that is because this is the age where the issues tend to really matter the most,” Rincker said.

“Most of the survey takers were married, had children and are from Illinois,” she said. “But there were people spread out across the country.”

A little over 50% of those who answered the survey had an estate plan, but 73% said they have a will and 56% reported they had a power of attorney for property.

“Oftentimes life insurance is overlooked as part of the estate plan, but 90% of the survey takers said they had life insurance,” Rincker said. “However, only two-thirds had enough life insurance to cover their debt.”

A survey question asked about the biggest fears of developing an estate plan. Responses included the fear that something will be missed or forgotten, arguing with siblings and losing or damaging family relationships.

“Let’s get a plan,” Rincker said. “Then you have the rest of your life to perfect it.”

In her second survey, time was the biggest roadblock to completing a plan.

“Pick a date, set a realistic expectation and hold yourself to that deadline,” she said. “There are always things to do around the farm and distractions, but get everybody together and get the plan done.”

Once the plan is complete, Rincker encourages farm families to review it every three to five years or whenever there is a major life event such as a death, divorce, marriage or birth of a child.

“Also do a beneficiary checkup every two to three years,” she said.

Identifying heirs is a challenge for some farm families.

“About 26% said they had no identified heir,” Rincker said.

“I asked what was the biggest challenge and the responses included no immediate heirs and their children were not old enough to make decisions on this,” she said.

“In the new survey, most said they did not have a succession plan and 57% said they had open communication about an estate plan,” the attorney said. “I say that is too low and this is an issue for farm families.”

“You are going to have uncomfortable conversations, somebody may storm out of the room and somebody may yell and get upset, but you must keep going,” she said. “Because the alternative is you are just not talking about it.”

Every farm family and farming operation is different.

“A lot of farm families want to treat their children equally, but equal is not always equitable,” Rincker said. “It is good to have everybody involved because there should be no surprises.”

Successful estate planning discussions can occur, the attorney said, when clear goals are set ahead of time, there is an agenda and transparency and honesty are part of the process.

“Every family dynamic is different, so talk and keep talking,” Rincker said.

“A mediator can help facilitate the discussion and it may or may not be an attorney,” she said. “I think this is a really underused thing in agriculture for estate planning.”

Only one survey taker reported that a child or heir had a prenuptial agreement.

“I love prenups. They can really work with a succession and estate plan,” the attorney said. “A prenup should not be taboo. It is like an insurance policy.”

For business planning, there are four basic types of business entities — sole proprietorship, partnership, limited liability companies and corporations.

“Corporations have the most administrative overhead, including the requirement of annual board of director meetings and shareholder meetings,” Rincker said. “I like limited liability companies, but there are disadvantages, so it is important for farms to weigh the components.”