For example, selling the family farm to the kids, taking back the mortgage, and then living off the income is one way to transfer the farm and minimize the tax at the same time. Of course, someone in the family must be willing to take over the family farm. They must operate it generating sufficient income to pay the mortgage and expenses even if it is interest-free or at a very low amount. If there is more than one child involved, some discussion will be needed. Discuss how the child that is not taking the farm over will be treated. Most people want all parties to be treated fairly.
Both parties, the farm owner and the son must have their own accountants. They must have a plan that is best for both of them! If one is not well looked after in this situation there may be some resentment. There also could be future tax issues that need to be resolved.
The previous example was for someone who owned a farm. They wanted to transfer the farm to their children in the most tax-efficient way possible. The process also applies to businesses as well. Although not all children want to take over the family business. Sometimes the business may need to be sold and the funds invested to generate sufficient income for the owners. Either way estate planning is extremely important to ensure that the amount of taxes are minimized and the money is there it passes along to the heirs of the person the estate is for.
Obviously the simpler the better. A simple straightforward estate plan costs less to set up and administer. However, not everyone’s investments are that simple and family situations are also not that simple.
There can be many children, spouses, brothers, and sisters to look after and so on. What if you have a disabled child or a brother or sister who needs to be looked after. They may not be able to generate income on their own. An estate in the form of a trust fund might be needed to provide for the person with disabilities for as long as they live. This is just one small example of what parents may want to think about and may need to consider when they are setting up their estate plan.
Setting up trust funds and estate plans may need the services of a legal team and certainly an accountant. If you have a large estate, this may not be onerous for the estate. If your estate is relatively small, then it may not be appropriate or necessary to have an estate plan drawn up. A simple Will will be sufficient that divides the proceeds of the estate to the family members that you designate.
The executor of your will should be carefully chosen. Someone you trust, someone who has the time, and someone who has the knowledge to make the correct decisions for your estate and for your family. While a family member might be the logical choice, you will want to have all of the issues considered. They must have the ability to look after the estate. Also, the knowledge to make informed decisions. As well as the political know-how to navigate through family politics is also a great asset to have.
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