What stage are you at?
I believe that we have several stages of life when estate planning to consider.
The first is the wonder stage. This is when you are just starting out and wondering about where life will take you and what will happen. You still need a will and powers of attorney.
The next is blunder. This stage is when you start pushing into your interests and figuring out what works and what doesn’t. You may have failed business, wild success, and unforeseen events in the blunder stage. You need everything from the wonder stage plus some sort of wealth replacement or contingency plan documents like life insurance or a line of credit.
The next is the thunder stage. This is when you are accumulating wealth and executing on your vision that you refined while blundering. Now options to grow and preferential deals with other resource holders become important. Formal relationships and business entities play a role.
Following thunder is the sunder stage. This stage of your life is when you should consider separating assets into various groupings, selling assets, or pushing them down to the next generation. Now you are considering rights of first refusal to the next generation, plan sales, reduction in work, and gifting.
The final stage is the down under. This stage is, depending on your personal ethos, preparing for the next great chapter of your story, preparing to haunt your friends and relatives or simply transitioning to an official daisy pusher. All the prior stages have a role to play as do an honest assessment of what you can do and script for in advance and what you have no control over.
Each one of these stages calls for different considerations and different planning documents to address your departure during that stage of your life.
A friend of mine was recently asked to define what is a good estate plan. One of the responses was:
“A system of production asset and real property management and disposition that secures control to the producer(s) bearing the greatest financial risk, flexible enough to absorb the shocks and family member relationships" or Land wealth retention plan. (Citation available on request).
My response to the question was laid out below with Apologies to CLAUSEWITZ, On War and Sun Tzu, The Art of War
It is a very difficult task to construct a theory for the art of a good estate plan and so many attempts have failed that most people say that it is impossible.
We would give up on estate planning but we can all agree to certain maxims that exist:
That on farm heirs will be disadvantaged in the absence of a well thought out and executed plan;
That each benefited party to an estate plan has potential reactions and participations should be evaluated from the angle for their own pecuniary gain first and that of their off spring second;
That clearly defined objective and distributions of assets and power are essential and that all thoughts of parties getting along or making decisions for the benefit of a collective over their own best interests because they always have to date or have shared genetic material is a sure fire way to destroy a plan;
That money and assets provided to off farm children can and will serve as a resource pool to litigate grievances, real and perceived, against the on farm heir while the on farm heir will be provided assets that they seek to shepherd for the business continuity and place them at a disadvantage in litigation;
That success must be defined not the plan maker and nobody else;
That every year that wealth is transferred to the on-farm heir during the elder generations life time erodes the position of the off farm heir to claim inequitable treatment or surprise;
That winners plan ahead, and planning is identifying who is responsible for strength and weakness, what are those strengths and weaknesses, where are those strengths and weaknesses, when are those strengths and weaknesses exposed, and as a result what advantages are available and how they should they be leveraged.
It might be a bit jaded but, based on just this last week’s conversations about conflict between off farm heirs and on farm heirs and the number of court actions I have seen recently where otherwise rational adult children of a farm operation turn to the court to divide and parse out the family land wealth, it is accurate.