For estate planning purposes, a gift is a lifetime transfer of assets for which no payment is received or less than market value, also known as a bargain sale. Well-planned gifts can be an effective way to transfer assets, often tax-free.
Life insurance should be considered as part of a comprehensive estate plan. Term and whole life are the two basic types of life insurance policies. Term life insurance is a contract that will pay benefits if the insured dies during the term of the contract; it is the less expensive of the two kinds of insurance. Whole life insurance provides death benefits, which are similar to those of term insurance, and gradually builds cash value over time as premiums are paid. Life insurance can be used to fund buy/sell agreements, replace the value of assets that have transferred to another family member, establish trusts, provide for non-farm heirs, or pay estate taxes.
Living Will, Health Care Proxy, Power of Attorney
A living will is a way to state your wishes regarding treatment should you become terminally injured or ill. A health care proxy allows someone else to make critical medical treatment decisions for you. Through power of attorney you can designate the same or another person to act on your behalf regarding financial and legal matters. These documents make it possible for you to choose someone to make difficult medical and financial decisions in the event that at some point you cannot make them for yourself.
Trusts are legal arrangements under which assets are managed by a trustee for designated beneficiaries. Assets are often placed in trusts to provide for their professional management. The trust document also designates who will receive the assets once the trust terminates. They can provide financial security for surviving spouses, children and grandchildren. There are a variety of types of trusts so work with your team, your accountant or attorney to choose the one best for your situation.
A will is a legal document that provides instruction about how your estate will be distributed after you die. Revisit your will periodically, especially when important family or financial circumstances change, such as when a child is born, a person important to the farm business dies or a family member makes it clear that he or she has no interest in working in the farm business.