Dementia puts farm and family at risk
The following is a fictional case study created by BDO.
When Ida’s husband died at 40, selling the farm didn’t cross her mind. She rolled up her sleeves and took over the role of farm manager. With three children aged 12, 15 and 18, she was determined to keep the family farm alive for them and continue moving forward with plans she had shared with her husband.
When Ida’s oldest child, Stewart, finished university, he came home to farm full-time. His younger siblings, Kathleen and Linda, helped during those tough first years but eventually chose other professions.
In the 40 years following her husband’s passing, Ida became a progressive farmer and tireless community volunteer. Her appearance and boundless energy never seemed to change and many in the community would never guess that she was almost 80.
She managed all the finances and accounting while Stewart took care of the agronomy and equipment maintenance on their mid-sized grain operation. It worked.
A few years ago, at Ida’s 75th birthday party, Kathleen and Linda suggested to Stewart that it might be a good idea to discuss mom’s intentions for her will.
It was a short conversation. Ida had no desire to discuss her will or talk about what would happen to the farm when she passed. She advised the family that she knew what she was doing and would let them in on the plan when the time was right.
In the years after, this became a source of friction between the siblings. Kathleen and Linda would continually push Stewart to get Ida to disclose information about the farm and estate planning. Eventually, a rift developed between Linda and the rest of the family. She was in a tough place financially after a divorce and couldn’t understand why they all just bowed to Ida’s decrees.
Stewart was approaching 60, and although he hadn’t married, he was in a long-term relationship and there was talk about retirement and a different lifestyle down the road.
Until now, he was fine with the division of responsibilities between him and Ida. He only had to take part in the aspects of farming he loved – growing the best crops he could. But now he was beginning to feel vulnerable. He had no idea what the balance sheet looked like and where he stood.
Stewart set up a meeting with a farm transition specialist (Ida declined to attend) and began working on a draft proposal to offer Ida, stating his objectives on the farm and moving forward into retirement. It was around this time that Stewart and others started noticing a change in Ida.
Over a period of a few months, Ida began changing from her normal, vibrant, energetic personality to a reclusive and confused state. The doctors told Stewart that Ida was showing signs of dementia and that the family would need to consider how to care for her. She was declining quickly.
Linda pushed to have Ida declared incompetent so they could access bank accounts and start selling assets. Kathleen and Stewart were reluctant but were in a difficult situation: Ida’s care was going to be expensive.
Stewart was embarrassed by his lack of ownership in the business he’d been committed to for 40 years.
Fortunately, Ida’s lawyer had prepared a power of attorney decision-making authority to all three children, leading to some awkward discussions between the siblings who hadn’t agreed on much in recent years.
Stewart was embarrassed by his lack of ownership in the business he’d been committed to for 40 years. All the land and equipment and even the vendor and supplier accounts were in Ida’s name only. On top of everything, Stewart wondered why his mother felt the need to give his non-farming sisters power of attorney responsibility.
As Ida’s mental capacity diminished, so did the family dynamics. Stewart’s partner was concerned about their ability to plan for retirement. Linda didn’t want to see cash spent on equipment upgrades or major repairs. Kathleen became a mediator between her siblings, and their problems were compounded by grief as the Ida they knew and loved was no longer herself.
Ida’s mental function had deteriorated to the point that she couldn’t provide instructions nor update her will. All three siblings realized that their reliance on Ida to lead the family business indefinitely put them in a difficult spot. It had been easier to go with the flow and not rock the boat.
The family and the farm were now in financial and emotional limbo, but Stewart faced the most uncertainty going forward. He had invested decades of hard work in the farm and now found himself unsure of his standing in the estate. He was also charged with overseeing Ida’s care which was becoming increasingly difficult. If only they had acted earlier. Delaying the inevitable had turned out to be unfair to everyone involved, including Ida.
Talk to your lawyer and accountant to determine how your transition plan will be carried out under normal circumstances, but also if you are incapacitated in some way. Once an individual loses mental capacity, they cannot sign or make changes to legal documents.
Work with a lawyer to prepare a power of attorney document. In Quebec it’s called a power of attorney and protection mandate. This will clearly state what that attorney can do on your behalf and what their limitations are. Review this document regularly to ensure it continues to meet your needs.
If you do not have a power of attorney/protection mandate and lose capacity, a guardianship would need to be granted through the court in order for your financial, property and personal affairs to be managed.
BDO is a trusted advisor for agricultural accounting, tax planning and business consulting.
From an AgriSuccess article.
How do you keep your transition plan alive? In this final webinar of the series, learn how to communicate regularly with stakeholders and advisors, review your plan, and identify when you need to adapt and change.