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Estate Planning in Uncertain Times

Some people have told me they are going to wait until Congress has a new estate tax system figured out to work on their estate plan. I want to give you the "inside" scoop: The estate tax system will never be figured out. It will never be settled. Taxes are always subject to change.

The best approach you can take is to be proactive and put a plan in place.

The key to any effective estate plan is to create it with a good estate planning attorney, then maintain it, monitor it, and respond to changing economic and legislative conditions. You do this with your equipment, livestock and grain – why wouldn't you with your estate plan?

Some of the key elements in putting an effective plan in place are as follows: Choose your estate planning attorney wisely. Enlist the help of an estate planning attorney with the expertise to address the individual circumstances of your situation. If you are a farmer, you need an estate planning attorney who has significant experience in agricultural estate planning.

Begin with the end in mind. This popular business concept applies in estate planning as well. Once you have identified how you want the estate to pass in the event of your death, an estate planning attorney can evaluate the tools available to determine the most advantageous manner in which to achieve that result.

Tackle the tough questions. A qualified estate planning attorney will help you think through the "what if" questions of life. What if my farming heir dies prematurely? What if none of my grandchildren want to farm? What if my spouse remarries after my death? A good estate planning attorney will ask these questions, and listen intently to your thoughts on the matter and develop workable options to uniquely fit you.

Consider lifetime gifting if appropriate. Based on your individual circumstances, concerns, goals, heirs, and assets, an experienced estate planning attorney can design an individual plan structured to achieve your goals and address your particular concerns. Once that foundation is set – understanding what you want to protect, what you want to preserve, and how you want to transfer it – then an estate planning attorney can counsel you as to whether it is wise to supplement your estate plan with a lifetime gifting program.

Sometimes, the gifting program is as simple as gifting $13,000 (i.e. the annual exclusion gifting amount for 2010) of equipment away each year. Or perhaps forming a limited liability company and gifting away membership units each year.

Many options exist, but the first step is to get the plan designed.

The future of the federal estate tax structure may be in flux, but planning with uncertain variables is nothing new. A plan can be tweaked and modified to adjust to changes in the estate tax structure, but a good foundation must first be in place. You've spent the time and hard work necessary to create your legacy. Make sure you spend the time and hard work necessary to preserve that same legacy.

Growing up in Parkston, S.D., and seeing all that farmers dealt with, I know that people are so much more than a balance sheet. As we were signing a couple's trust documents (which contained a great generational plan to keep the land together and the farm viable), one client said: "You know, Carolyn, this isn't just a farm…this is our life. It represents 51 years of our life together."

What type of legacy will you leave your family?

Thompson is a Sioux Falls, S.D., attorney who specializes in estate and business planning. Contact her at 695-362-9100 or see www.cathompsonlaw.com.