Too Good to be True
Dear Michael: We went to a few meetings sponsored by our lender about estate planning. We agreed to meet with their estate planning specialist from this meeting afterwards. She recommended that we consider doing a Limited Liability Partnership. We farm together with my husband’s brother as joint tenants in the land and equipment etc. and she thought this would protect our land from long-term care costs in the future. We thought we should get your opinion on it. – LLP For Us?
Dear LLP For Us: There seems to be a growing trend of people buying in to things again because this is the only option for ‘estate planners’ to get paid. Vendors are out there selling living trusts (another form of ownership similar to joint tenancy), Limited Liability Partnerships, and Limited Liability Companies as solutions to such things as long-term care issues, ease of transfer at death, probate avoidance, etc.
If Living Trusts avoid probate, then why do they come with a Pour-Over Will that says ‘upon my death, put everything I don’t have, that I either forgot or didn’t put into my trust’s name, back into my trust.’ Such things would be things I forgot or didn’t keep up with such as motor vehicles, savings accounts, etc. If they come with a Pour-Over Will, don’t I have to go through probate to put the stuff back into my trust? If Living Trusts were perfect, then why do they need a Pour-Over Will?
Avoiding probate on the rest of my assets, right?
Okay, so at my death I name successor trustees to act as my attorney in fact or trustee for me upon my death. Typically children are named as successor trustees.
Which one of your children feels confident enough to make changes to deeds, set up estate accounts to account for any outstanding bills and income, do the income and estate tax returns, etc. all the while knowing they have a fiduciary responsibility to do this the right way. If they don’t the other heirs (other children) can sue them for making mistakes or for not getting their money they thought they had coming, or just because they want to.
Which child is going to look at this and say “I’m not dealing with all this – I’m going to hire an attorney to do all of this so I can’t get sued by my siblings” And aren’t we right back where we started, paying legal fees – aka probate costs? Where’s my savings?
Other estate vendors are saying use an LLP or LLC – it’ll solve all your problems.
An LLP in its purest sense means this: The Limited Liability typically means any liabilities incurred in the future would be limited to the assets held by the LLP or LLC. If a person gets sued, goes broke or needs long-term care, isn’t it true that only the assets of the LLP or LLC can be taken? If you put all of your land into the LLP or LLC, isn’t the only thing creditors can take is all of your land – the very thing you were told to put in there to protect it?
If you want to try and protect your land, you might think about putting your farming business into an LLP or LLC. You might start a new company that does all of the business on your farm and it might include machinery, vehicles, livestock, etc. If any of the aforementioned liability occurs from the operation of your business, I think they can only go after these assets – not the land you personally own outside the LLP or LLC.
If you’re dealing with estate knowledge purveyors who don’t know the answers to these questions, you’re perhaps dealing with someone who is selling legal documents and not solving problems for you. They may be just like the old ElectroLux salesman standing outside your door just hoping for an opportunity to dump dirt on your floor!
These are the questions I would ask before I jump into anything that sounds too good to be true. I don’t have the answers because I’m not an attorney.
“Keeping the Family Farm in the Family”
Great Plains Diversified Services, Inc.
1424 W. Century Ave., Suite 208
Bismarck, ND 58503-0917
Toll Free: 1-800-373-4078