By MICHELE F. MIHALJEVICH
Indiana Correspondent

FORT WAYNE, Ind. — Helping farmers, attorneys and accountants sort through the intricacies of estate planning, transferring the family farm and preparing a will were the primary goals of Gerald Harrison’s recent visit to Fort Wayne.
Anyone starting the planning process should ask themselves what they want to accomplish and then go about determining the best way to achieve it, said Harrison, a farm management extension economist and professor in Purdue University’s Department of Agricultural Economics. He spoke March 3 to more than 50 people at the Allen County Cooperative Extension Service office.

Many family businesses don’t succeed after they’re transferred from one generation to the next, Harrison explained, noting a survey showed 70 percent fail after going to the second generation. Family businesses transferred from the second to third generation fail half the time.

As for why those businesses failed, he said 60 percent didn’t make it because family members simply didn’t get along. A lack of competence on the part of later generations accounted for failures in 25 percent of cases, and about 10 percent failed because of taxes.

The treatment of children who stay on the farm versus those who leave is an important consideration when organizing an estate plan, he stated, adding one should think if they’re treating all their children equitably.

“You have one kid who says, ‘I’m supposed to get the farm. We had a deal. That’s why I’ve been here for 40 years.’ But the other kids don’t believe him,” Harrison pointed out.

Farmers or business owners should consider life estates, in which a person or people retain or are granted a life interest, Harrison said. A life tenant could be in charge of day-to-day management and would be responsible for maintenance of the property. The business owner should also decide who should gets what when the life tenant dies.

It’s also important to understand state rules in the event a business owner dies without a will, he added. For example, if the business owner has a surviving wife and children, the wife receives one-half of the estate and the children split the other half.

Wills may include provisions for the distribution of property and for the management of investments and business interests, Harrison stated. “Wills are very important, and it’s still a good idea to have one,” he said. “It doesn’t mean you don’t need a will just because you’ve done this other stuff in the meantime.”

Various options are available, depending on how much control the business owner wants to keep in the transfer process, Harrison noted. Those wanting to maintain control would be better served by using bequests or revocable trusts, while those willing to give up control might prefer an outright gift or irrevocable trust, he explained.

Those looking to avoid probate might consider living, or lifetime, trusts and life estates, joint ownership with right of survivorship, payable-on-death (POD) bank accounts or a transfer-on-death (TOD) plan for securities, real estate, vehicles and equipment, Harrison said.

“It’s how you own it, not what you own,” he explained.

Harrison also recommended farmers and business owners always do background checks on new employees, especially ones they don’t know and especially those who might handle money or finances for the company.