Dear Michael: We've always read your column and have kept most of your columns for years. However, we have two questions to ask you. One, where can we check on any columns we may have missed? Two, what about some of the less technical questions you receive from people or maybe a better way to put it, is what are some dumb things people think about that they should avoid in estate planning? – Questions.
Dear Questions: We have set up a few different places where you can read my column whenever you'd like and these columns are available for as long as two years past the time that I've written them. You can go to www.keepthefamilyfarm.com or click on this link www.farmandlivestockdirectory.com and have access to all of my old columns. You can even see a funny picture of me – although I am funny in all of my photos and it's the same one you see in the paper. Just funny looking, I guess.
Second, what are the dumb things people ask, or perhaps better stated, what are some of the dumb things people believe? Maybe it would be easier to answer the second question so you know what I have to deal with.
Dealing in Reality
It seems a lot of people feel like if they believe something long enough and hard enough, it becomes true. Under this heading, I have several sub-headings such as:
"My kids will never fight with each other once we are gone!"
This one is a classic. Every time I have someone tell me this – which is about seventy-five percent of the time, I have to ask if their children are human. When they reply that 'yes, indeed, their children ARE human' I know there's a seventy-five percent chance the children will eventually get into one scrum or another – either before you die or, more likely, after you die – when you're not around to be the referee anymore.
They may fight over little things or they may fight over big things – everything from which gun or piece of jewelry each of them received from Dad or Mom to fighting about how much Jr. has to pay to the non-farming children for the farmland – normally hundreds to thousands of dollars apart in value – per acre!
If your kids are human beings, they are going to have some issues – it's human nature to do this. There's nothing wrong with them – in fact, I'd be a little worried if they didn't have a dustup every once in awhile. It's the ones who keep their feelings bottled up who eventually blow sky high someday – so I'd rather they bleed off pressure slowly over time rather than going volcanic on us someday.
The best way to defuse it is to – get this strange idea – talk to them about what your estate plans are going to be. If you don't know what you want to do, talk to an estate counselor to find out what it is you do want to do. If you don't know any farm estate counselors, I happen to know of a great one. Get the beginnings of a plan started and then start telling the kids about what you are thinking or what you had in mind.
If you can see they don't exactly agree with what you are thinking, have it out with them, and have them speak their mind. Sometimes, you may agree with their logic and change your plan and other times you two can't come to terms, but they accept your decision. Make certain they know it's 'your' decision and not to take it out on any of the other heirs, their siblings.
Second Dumb Things People Believe and Hope to Be True
'Oh, my property isn't worth that much because the farm value isn't worth that much' or 'I bought it for this and it should still be worth this' or 'I don't agree with what people are paying for property in my area – they're crazy and my property isn't worth that much!'
There are three possible entities out there who might disagree with your valuation method and two of them really don't care what you think it's worth – and the third might disagree but will make it miserable for everyone else.
Those first two would be IRS and Medicaid. They don't care you think your land is worth eight hundred. They only care that land right next to you or close by sold for twenty-five hundred dollars – and that's the value they use. The pure definition of value by IRS is this – 'the current market value of the property based on recent land sales in the area'. Doesn't get much clearer than that, does it?
As such, when you're planning to avoid costs or interference in your estate plan for a government entity, you better plan on using their numbers just because they will!
The third entity might be your other non-farming children when you're setting up your estate plan for a farming child. You might feel the land is worth eight hundred but they'll know your farming child can sell it for twenty-five hundred and that should get the family brawl started. Hundreds of thousands are on the line – and you're kids will know!
If you're going to use a lessened value on the land in your estate plan for a farming child, you better explain to the other children why you feel this is the right number. Remember, using a number today isn't going to be the same as five years, ten years or twenty years from now!
Which leads us into another dumb thing people like to believe but history has proven wrong over, and over, and over and over – 'Land is going to be worth less in the future because…..' we'll get into this next week.