Why an updated will is the most important part of any transition plan
There are many steps and tasks on the pathway to transition, but one overrides them all – writing and updating your will. It’s impossible to overstate how important this step is and shocking how many farmers either don’t have one, or it’s woefully out of date.
Transition builds a shared vision between multiple generations. It also involves hard assets like land, buildings, quota and equipment. The single most impactful way to address both is to write a will.
This task gets overlooked because there are so many other things that seem more important for the farm business. And let’s face it, a will represents mortality and who wants to think about that?
Like all aspects of transition, having the right attitude or mindset about the job makes all the difference. It’s true – a will deals with what happens when you die, but it’s something that happens to us. So let’s get over that right off the bat and take that emotion out of the equation.
Think of a will as an empowering document that protects your loved ones, business partners and the business itself. It gives you control and peace of mind. It’s also one of the biggest gifts you can give your family. Those are positive things.
Who needs a will?
Everyone involved in the farm should have a will. Start as a young adult at 19 or 20 to simplify updating it as earning potential and asset acquisition occurs.
All family members involved in the transition plan should have an up to date will. If employees have a stake in the business, encourage them to have a will as well.
How do I create a will?
The hardest part of any unpopular job is getting started. Sometimes, it helps to break it down into small steps. If you don’t have a will, stop reading right now and call or email your lawyer to set up an appointment to start the process. Leave a message if you’re reading this at night.
Don’t think about any of the uncomfortable details or decisions yet. Just get the ball rolling and make that appointment. Boom – you’ve taken the first step. Your lawyer has probably done hundreds of wills and can walk you through the process. And you don’t have to do it all in one shot. Make the easy decisions first and chip away at it until it covers all the bases.
To prepare for that first meeting with your lawyer, compile a list of assets and start thinking about your potential beneficiaries. Try to think through the issues that will complicate the will, such as second marriages, business arrangements, etc. Think about what you want to happen if something happens not only to you but to the entire family. Your lawyer will have questions to help guide you, but thinking about these scenarios can help you shape the will. Write your will based on the situation you’re in today, but it’s not one-and-done, it will need revisions as your life and business evolve.
Although a will is the centrepiece of your estate planning, address these three documents simultaneously:
- Power of attorney
- Critical care
A will is a legal document that describes two main things:
- Who manages your estate after you die
- How your estate gets managed
A will tells your provincial court who gets what from your estate and how to treat those assets. Every province has its own rules and legislation regarding estates and property distribution. If you don’t have a will, the province steps in and makes the decisions (and there are many reasons you and your family don’t want this).
If you die without a will, your estate gets carved up and given to your spouse and children according to pre-determined percentages. There’s no room for negotiation or nuance or any manoeuvering to save tax or honour your wishes.
There are three big-ticket items covered in a will:
- Naming who will administer the assets of the deceased
- Outlining who receives which assets
- Expressing who you wish to be the guardian of your children if you die when your children are still minors
Your lawyer’s job is to ask you the appropriate questions to ensure the will reflects your intentions. Their knowledge can help save your family money and stress during what can be an upsetting time. Forget about an online or mail-order will kit. You need a professional’s help. Ideally, you’ll want to work with a lawyer familiar with agriculture who knows about estate planning and tax law.
In addition to getting the details right, you also need to name an executor or personal representative to act on your behalf after you’ve died. The person you select may have to deal with your children's guardianship, probate fees, tax issues, competing or controversial creditors and beneficiaries. In the short-term, they’ll also maintain day-to-day business operations if necessary. This can be as simple as paying outstanding bills and making sure the staff is paid. It can get more involved depending on the farm business.
Put some thought into who you select to fulfill this role. You want someone who is decisive, can get the job done and is fair and impartial. Discuss with your executor to help them understand your wishes and act on your behalf.
It’s a good idea to name a couple of alternate options for executor. Circumstances change over time, and your first choice may be unwilling or unable to fulfill the responsibilities. Choose your executor wisely and review this decision regularly.
What’s an estate plan?
Don’t confuse your will with an estate plan. A will takes care of your estate when you die. An estate plan can mean the transfer of wealth while you’re still alive.
Since you’re on the road to transition already, make it a habit to update your will every three to five years. Do it more often if you’re accumulating assets or starting new enterprises. It’s a bit like your equipment insurance policy – you notify your agent if you buy or sell a piece of equipment to ensure you have the right coverage. The same goes for a will. If you buy or sell a farm or start a trucking company, you should be calling the lawyer to update the will. This is important for the transition plan – and should reflect your transition intentions.
What a will won’t do
Important as a will is, it doesn’t wholly fulfill a transition plan. Keep conversations and open discussion with those involved during the process. Keep in mind that the younger generation may have formed assumptions about what your intentions are. Being open and talking through what’s in your will while you’re alive can be challenging, but it’s better than pulling the rug out from someone’s preconceived ideas about how things will go if you pass away suddenly.
Power of attorney
The executor steps in after you die. A power of attorney makes decisions on your behalf while you’re alive but incapacitated due to injury or illness.
There are two types of power of attorney – one for personal matters and one for financial decisions. Selecting someone to have power of attorney requires the same diligence as choosing an executor. Keep both informed of your wishes and apprised of any changes. They can only honour your wishes if they’re informed and up-to-date.
If something happens and you haven’t chosen someone to have power of attorney, it falls on the family to apply to the court for children's guardianship. It’s an expensive and traumatic process, so make sure this is covered.
The person who has power of attorney isn’t necessarily the same as the executor of your will. They are separate functions.
Critical care or health care directives document
Health care directives (sometimes referred to as a living will) make clear your wishes for personal and medical care if you’re unable to make decisions.
A will is one of the kindest things you can do for your family. It can be upsetting to think about what you want your last days to look like. But if you’re unable to communicate, think about how hard it would be for your loved ones to make choices for you.