Friday, January 6, 2017

Budgets and Operating Loans

Famers and ranchers are businessmen.  Just like any other business, farmers and ranchers need a budget.  A budget forces a farmer to set in writing expectations for expenses and income.  A good budget will show the relationship between expenses and anticipated income, and assist in making decisions.  For example, if your budget shows that you can't make your loan payment, then maybe you should put a hold on that new tractor.

A budget will also make you more money.  It will assist you in setting goals, and determining whether those goals are realistic or not.  A budget should forecast income based on current commodity prices, and forecast commodity prices.

A good budget should also be realistic. Farming and ranching are incredibly unpredictable.  A single hail storm can change a farmers fortunes.  A realistic budget will help you adapt to challenges on the farm.

An important tool in making a budget work is an operating loan.  Typically farmers and ranchers incur most of their expenses on the front end.  Farmers pay for seed, fertilizer, and fuel just to put a crop in the ground.  All of this takes money.  However, a farmer isn't paid until he sells his crop.  An operating loan can bridge the gap between expenses early in the season, and income at the end of the season.  Many banks offer famers and ranchers operating loans, and charge interest on the money borrowed.

A wise farmer or rancher will create a budget, and only draw on their operating loan as is necessary to pay for budgeted expenses. 

Lance J. Schuster at 12:56 PM No Comments | Post a Comment
Monday, November 7, 2016

Frequently Asked Questions About Probate

Joseph D. FairbankWhat is probate?

Probate is the court-authorized process for proving a will or distributing an intestate estate. When a person dies, they usually leave assets behind that are officially titled in their name. The most common examples of this are real estate, financial accounts, and vehicles. For example, if you own a house when you die and your spouse or children try to sell the property, they won’t be able to do so without your signature. Proving that you are deceased won’t waive this requirement—someone has to be authorized to sign the deed on your behalf to convey ownership of the house. This is the most important thing the probate process does: it authorizes someone to sign in your name, pay your debts, and distribute your property to your loved ones. The person authorized to settle your estate, your Personal Representative, is required to follow your directions in your will, if you have one.

Don’t I want to avoid probate?

In some states, the probate process is long, complicated, and very expensive. But Idaho follows the Uniform Probate Code, which has greatly simplified the process and reduced the time and cost of probating a typical estate. However, there are still factors that can motivate you to do planning to avoid probate. One such factor is concerns about privacy. If you go through probate, then your will must be filed with the court, and will become public record. The laws of probate also require a full inventory of your assets, but the inventory doesn’t always need to be filed with the court. If you don’t want your will (and possibly a list of your assets) to be available to the public, then you will want to plan ahead to avoid probate.

Another factor is ownership of real property in other states. If you own real property in more than one state when you die, your estate will need to be probated in every state in which you own property, multiplying the cost of probate. This can make things especially difficult (and expensive) where the property is located in a state with complicated probate laws, such as California or Illinois. If you own real property in more than one state, consider putting the property into a trust to eliminate the need for multiple probates.

Who should be my Personal Representative?

If you have a will, it will designate a person as your Personal Representative. You should choose someone responsible, whom you trust to follow your wishes in your will and treat your beneficiaries fairly. If you anticipate disagreements about division of your property, you should consider your Personal Representative’s relationships with the other beneficiaries and their ability to deal with that kind of pressure. Your Personal Representative does not need to be a beneficiary of your estate, though they certainly can be. You can even select a professional Personal Representative to handle the estate. A professional is paid for their time, but under certain circumstances their added experience and impartiality can make a big difference in making the division of your estate run smoothly.

If you don’t have a will designating a Personal Representative, then any related party may apply to be the Personal Representative. Competing applicants are measured based on their degree of relationship to the deceased. Spouses are given preference, then children or parents.

Do I have to go through probate more than once?

The general rule is that each person’s estate must be probated once, but there are exceptions. Some estates don’t have to be probated at all, such as where all assets of the estate are held in a trust, or where the estate is small enough to be handled by affidavit or summary administration (see below). Sometimes a probate can be effectively postponed, such as when one spouse of a married couple passes away and the entire estate goes to the surviving spouse. In this case, there’s typically no need for probate during the surviving spouse’s lifetime unless the surviving spouse takes some action requiring probate, such as a sale of real estate. Often the couple’s heirs can simply do a joint probate after the second death.

A second or third probate will also be necessary where the deceased person owned real estate in more than one state (see above).

Are there any shortcuts to probate?

If your estate is small enough, the estate can be essentially probated by summary administration. There’s also an abbreviated procedure where the spouse is the only beneficiary of the estate. Whether one of these shortcuts applies to your probate depends on the specific assets and liabilities of the estate. Talk to a probate attorney to see what approach best applies to your circumstances.

How can I keep my loved ones from fighting?

We’ve all heard stories of families that fell apart over who gets to keep Dad’s favorite hat, Grandma’s wedding band, or the mountain cabin. It’s difficult to make rational decisions about ownership of property during the emotional weeks following the death of a loved one, especially when the property holds high sentimental value to everyone involved. The emotionally charged nature of this process is unavoidable, but there are ways to plan or work around the worst of it.

The most important thing is to be clear in your will or other estate plan documents what your wishes are. If you clearly say your brother should inherit your best saddle, then your other beneficiaries will probably respect your wishes. Most wills provide for a separate “personal property memorandum” that allows you to keep a list of items and who should inherit them. Avoid vague devises like “my piano to whoever plays the best,” which can invite competition and resentment. And don’t be afraid to talk to your children and other beneficiaries about what you’ve decided. If they’re going to be surprised or disappointed, it’s better for them to hear it from you.

After a person’s death, during the probate process, there are ways a Personal Representative can deal fairly with multiple interested beneficiaries. Some groups of beneficiaries gather and take turns picking single items from the estate, following a fairly determined order or drawing names from a hat. Other families hold an auction with fake money. If you are a Personal Representative dealing with fighting family members, talk with your probate attorney about ways to settle things fairly.

What records do I need to keep?

If you are planning for your own probate, you should keep a record of your major accounts and property in a safe place. It’s also a good idea to keep a list of important usernames and passwords for online accounts, as well as combinations to any safes. Many Personal Representatives have been frustrated by a will locked in a safe, or important papers stuck in a safety deposit box. Plan for your Personal Representative to be able to access your important documents.

If you are a Personal Representative of an estate, you need to keep track of the deceased person’s assets from the date of death until the assets are distributed to the beneficiaries. Account for money spent on the funeral, taxes, final medical expenses, and miscellaneous bills. You will eventually need to provide the beneficiaries with a final accounting that shows what assets the deceased owned at death, expenses paid, and the division of remaining assets among the beneficiaries according to the will or laws of intestacy. Nothing frustrates a lawsuit against a Personal Representative better than clear, thorough recordkeeping. 

Do Personal Representatives get paid for their time?

The Personal Representative is entitled to “reasonable compensation” for his or her services. What constitutes reasonable compensation depends on the Personal Representative’s professional background. Most Personal Representatives have no training or experience in this type of work, and their time is compensated at a nominal hourly rate, around $10 per hour. If he or she is a CPA or attorney, or if he or she is a professional Personal Representative, then compensation will be higher. This compensation is considered an administrative expense of the estate and will be paid out of the entire estate, before dividing assets between the beneficiaries.

If you are serving as a Personal Representative, be cautious not to overpay yourself or pay for an unreasonable amount of time. Beneficiaries have been known to sue the Personal Representative for taking unreasonable compensation.

Do I really need a probate attorney?

Yes. If your loved one died and you are serving as Personal Representative, call a probate attorney today. It’s better to take control of the situation early rather than waiting until after family members have begun taking matters into their own hands. While it is possible to handle an estate without an attorney, it is very easy to make mistakes that open you to liability later or cause problems within the family. The cost of a probate attorney usually amounts to a very small percentage of the estate and makes the process go far more quickly and smoothly.

It’s also a good idea to get an estate planning attorney to help you prepare your own will or trust. See my article, What Happens If I Die Without a Will?

Joseph D. Fairbank at 9:34 AM No Comments | Post a Comment
Estate Planning
Friday, November 4, 2016

The Election and Immigration

This November farmers and ranchers will have the opportunity to vote for the next President of the United States. Donald Trump has vowed to build a "big beautiful wall" at the border and to deport millions of illegal immigrants. Hillary Clinton has promised to introduce comprehensive immigration reform with a pathway to citizenship for illegal immigrants.

Many farmers and ranchers argue that Trump's plan to deport millions of illegal immigrants jeopardizes their livelihood. According to the National Council of Farmer Cooperatives agriculture in the United States faces a "critical shortage" of workers every year. U.S. citizens are largely unwilling to accept rigorous and phyically demanding jobs on the farm. In addition, H-2A guestworker programs are cumbersome and slow. The NCFC supports legislative reform that "includes both a program to provide access to legal workforce into the future and an adjustment for current experienced, unauthorized agricultural workers."

The American Farm Bureau Federation also recognizes the farm labor shortage and advocates for the new work visa program and allowing current illegal agricultural workers "the ability to stay in the U.S. and continue to work in the agricultural sector."

In November, 2014 President Obama attempted to address the immigration problems with a series of executive actions. Lawsuits were filed by a number of states challenging implementation of the executive actions. A U.S. District Judge blocked implementation of the executive actions on procedural grounds. The Fifth Circuit Court of Appeals upheld the injunction. On June 23, 2016, the U.S. Supreme Court issued a 4-4 decision which left in place the injunction and denied implementation of the President's executive actions.

The issues of immigration will be largely decided in our next election with the selection of our next President of the United States and Congress. Your vote counts, and will help determine the future of agriculture.

Lance J. Schuster at 9:50 AM No Comments | Post a Comment
Monday, October 10, 2016

CMS Prohibits Arbitration Provisions in LTC Admission Agreements

Jared AllenCenters for Medicare & Medicaid Services (CMS) seeks to provide basic protections to residents of long-term care (LTC) facilities in signing an agreement for the arbitration of disputes between residents and LTC facilites. On September 28, 2016, as part of a massive overhaul of consumer protections applicable to LTC facilities, CMS issued a rule prohibiting LTC facilities that accept Medicare or Medicaid from requiring potential residents to enter arbitration agreements as a condition of admission.

The rule places clear restrictions on arbitration agreements entered between LTC facilities and residents after November 28, 2016, the effective date of the rule. Restrictions and/or requirements include the following:

  • Arbitration agreements cannot be entered into prior to the existence of a dispute;
  • Arbitration agreements must be separate agreements in which residents make “an affirmative choice to either accept or reject binding arbitration for disputes between the resident and the facility[;]”
  • The LTC must provide an explanation of the agreement including, at a minimum, that the resident is waiving the resident’s right to judicial relief for any potential cause of action covered by the agreement;
  • The agreement must be voluntary;
  • The agreement must provide for the selection of a neutral arbitrator and a venue convenient to both parties;
  • The agreement must not be contained within another agreement relating to other issues; and
  • Guardians or other representatives entering agreements on behalf of a resident must be permitted to do so under state law and must not have a financial interest in the LTC facility.

Opponents of the new rule have suggested CMS lacks the statutory authority to restrict the use of arbitration, but in addressing those concerns CMS has concluded that the Federal Arbitration Act (FAA) does not limit its ability to regulate how arbitration agreements are reached as a condition of participation in the federal payment programs. Because CMS acknowledges the FAA applies to already existing arbitration agreements, the new rule has no application to such agreements between LTC facilities and current residents. The final rule provides: “[T]he rule we are issuing does not affect already-existing arbitration clauses, but prohibits Medicare-and Medicaid-participating LTC facilities from using them in the future, as a condition of participating in these programs. While we share the same public policy concerns about already-existing arbitration agreements, we are only addressing agreements reached after the effective date of this rule.”

Jared Allen at 4:35 PM No Comments | Post a Comment
Monday, September 26, 2016

What Happens If I Die Without a Will?

Most people don’t really think about making a will until they reach retirement age, and even then, many put it off until it’s too late. But if you were to die without a will, have you ever thought about what would happen to your assets? Who would take care of your minor children? How necessary is a will, anyway?

If you die without a will, you’re said to have died intestate. Without a legally binding will to tell the world what you want done with your property, we have to guess. But a court can’t simply take statements from your family and friends about what they think you would have written in a will if you had one, based on your values and priorities. Instead, we have a set of laws that apply the same values and priorities to anyone who dies without a will. These are the laws of intestacy.

What happens to my property?

For example, suppose you have a girlfriend you love like a wife and a best friend you love like a brother, but you have a bad relationship with your family. If you wrote a will, you’d probably leave most of your property to your girlfriend and a special gift or two to your best friend. If you die without a will, however, the laws of intestacy decide where your property goes, and the laws of intestacy assume you want to give your property to your blood relatives. In Idaho, all your property would go to your parents. If your parents were not living, then your property would go to your parents’ other children (your siblings).

Think about the blended family, with the couple who each want to leave their property to their separate children. Under the Idaho laws of intestacy, the spouse would inherit one half of the dead spouse’s separate property and all of the “community property” (everything acquired or earned during the marriage except gifts or inheritance). What if a parent in this couple wanted to treat all of the children as his or her own? Without a will (and without legally adopting the children), the property would go only to the parent’s spouse and own biological children.

Or what about a couple who are living together but not married? Idaho doesn’t recognize common law marriages after 1995. So if someone in one of these types of relationships dies without a will, their partner can’t inherit. The law sees them as unmarried, so all the property would go to blood relatives. In fact, if a couple is married, it doesn’t matter how close they are. Even if the couple has separated, the spouse would take all of the community property and half of the dead spouse’s separate property without a will. If there are no children or living parents, then the spouse would take the entire estate.

Many people want (or need) to treat different children differently. Whether wealthy or poor, close or estranged, gifted or disabled, the laws of intestacy give each of your children the same equal share of your property. And that’s only if they’re your biological or legally adopted child. Even if you raised the child, without that legal relationship, the child will inherit nothing.

If you make a will, however, you can decide exactly who gets your assets when you die. You could leave everything to your neighbor and disinherit your entire family if you so choose. That’s the beauty of the will—it lets you keep control of your assets even after your death. 

What happens to my children?

If only one of the children’s parents dies, then the surviving parent continues to care for them. But if all parents are dead or otherwise disqualified as parents, it gets more complicated. The court can appoint legal guardians for children whose parents have died, but the process can be long, expensive, and messy. There could be many people angling for guardianship of your children when you die. Idaho law permits any family member or any “person interested in the welfare of the minor” to apply to the court for appointment as guardian. If a child is fourteen or older, then even the child may appoint someone to act as guardian.

Once the applications have been made, the court has to choose the guardian that would be in the best interests of the children. As you might guess, arguing over which applicant is best for the children can be complicated and emotional. Meanwhile, the court might have to appoint a temporary guardian, and choosing that guardian can take time. And the court may very well appoint a guardian ad litem for the children to work with the attorney hired to represent the children’s interests in court.

This is usually not what the parents would want for their children. If you make a will, you can designate a guardian for your children in the event of your death. As long as the person(s) you designate accept the appointment as guardian, and as long as they are not unfit to care for children, then the court will follow the will. Even if someone else could prove they would be a better guardian, the court will follow your wishes as expressed in your will.

Don’t wait to make your will. Talk to an estate planning attorney today about taking control of your assets and providing for your children. 

Joseph D. Fairbank at 8:38 AM No Comments | Post a Comment
Estate Planning
Wednesday, September 21, 2016

FSMA Requirements Seminar & Lunch

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Friday, September 9, 2016

Weight a Minute

You’ve just harvested your potatoes and are hauling them to a processing facility when you see a weigh station up ahead. Then it dawns on you that you have no idea how much weight you're pulling.  This scenario happened to a client who found out the hard way that the State of Idaho takes its weight restrictions seriously.

Historically, the maximum weight limits on all Idaho highways has been 80,000 lbs. without an excess weight permit and 105,500 lbs. with an excess weight permit.  As of July 1, 2016 Idaho allows trucks weighing up to 129,000 on some roads.

These weight restrictions are based on the number of axles and tire size. Steer axles must not exceed the manufacturer’s load rating, single axle limits are 20,000 lbs. and the tandem axle limit is 37,800 lbs. when the GVW does not exceed 79,000. There are some industry specific exemptions including logging, aggregate materials and certain agriculture products, so be sure to check with the Idaho Department of Transportation ("IDT") to find out if you qualify. IDT has adopted a weight formula that provides a table of limits based on the number of axles and spacing of tires.

The maximum width of a vehicle in Idaho is 8 ½ feet and the maximum height is 14 feet. The typical maximum length is 75 feet, but can be increased to 97 feet for certain saddlemount combinations. Overlegal permits can be obtained if your load exceeds these limitations. IDT’s website has more information on the law.

What happens if you don’t follow the law? Idaho Code § 49-1013 has a list of penalties based on the weight your vehicle is over the limit. These range from a flat penalty of $5 for being 1,000 lbs. or less over the limit to $0.30 per pound when more than 20,000 lbs. over the limit. In addition, exceeding the weight limits by more than 4,000 lbs. is a misdemeanor.

If you’re unsure of your truck's weight go get weighed at a certified scale before heading onto the open road.  Know your weight, and know the law. 
Lance J. Schuster at 10:04 AM No Comments | Post a Comment
Monday, August 8, 2016

The Five Smartest Ways to Use IRAs (in estate planning)

One- Streeeeeeeeetch it Out

      The benefit of putting your retirement savings into a traditional IRA (as opposed to an ordinary savings or brokerage account) is that you can contribute your earnings pre-tax. Yes, you will have to pay income taxes on the money eventually. But the longer the money is invested in the account, the longer you put off paying the taxes. That means you can invest that money you would have paid taxes on, earning more money over time. And it means that when you do eventually have to pay the taxes, you might very well be in a lower tax bracket than when you’re at the height of your earning power. You can wait all the way until you turn 70½, when you have to start taking mandatory distributions. But even then, if you take the minimum required distributions, you can leave the rest of your money in there even longer, stretching out that tax benefit.

      So when you’re thinking about dipping into your IRA to buy that Corvette, think again. If you take the money out before you have to, you give up the benefits of putting off those taxes as long as possible. And if you’re younger than 59½ you’ll also have to pay a 10% early withdrawal penalty on top of the income taxes.

      The stretching concept also applies to someone who inherits your IRA after you die. If you leave your IRA to someone younger than you are, they’ll have a better chance to stretch out the tax deferral over time, maximizing the benefits of the IRA.


Two- Give it All to the Wife

      When you fill out the beneficiary designation form provided by your IRA account administrator, you can name anyone to receive the funds in your IRA when you die. You can give your hard-earned pre-tax cash to your kids, your brother, your favorite elementary school teacher—anyone you want. But if you’re smart, you’ll probably give your IRA to your spouse.

      When you die, your IRA will change to an “inherited IRA.” That means that whoever inherits the account will immediately have to start taking mandatory distributions that grow larger over the course of his or her life. And the payments get locked into that beneficiary’s life expectancy. That means that if you leave your IRA to your sister, and she dies and leaves your IRA to her kids, the IRA will still be making mandatory distributions over your sister’s life expectancy, even though it’s her younger kids who own it now. This is true for anyone who inherits your IRA, young or old.

      Anyone, that is, except your spouse.

      Your spouse can treat your IRA not as an “inherited IRA,” but as his or her own IRA. Your husband can roll it over and keep it until he turns 70½ just like you could. And when he leaves the IRA to your daughter, the IRA will make distributions according to your daughter’s life expectancy, not your husband’s. Making your spouse the beneficiary of your IRA is like getting a free extension on the tax benefits. And besides, you were going to leave most of your property to your spouse anyway, right?


Three- Give your Taxes to Charity

      Many people want to give to charitable organizations when they die. You might have a favorite charity, educational institution, hospital, or church that you want to support. You can’t take it with you, so you may as well do some good with it, right? If you do plan to give to a qualified charity, the smartest thing to give them is your IRA. A traditional IRA (not a Roth IRA) is composed of pre-tax income. By holding the funds in your IRA you can put off paying taxes on any of it until you turn 70½, but you still have to pay income taxes on every dollar you pull out.

      The great thing about charities, however, is that they are exempt from incomet taxes. Smart planners who want to give to a charity give from their IRAs, because the charities can take all the money and not pay a dime in taxes. For example, suppose you have an IRA worth $500,000 and other investments worth $500,000. Congratulations—you’re a millionaire. You could give your investments to your church and your IRA to your son. The church would get $500,000 but your son would get an account worth much less after he’s paid taxes on it, especially if he decides to withdraw it all at once, rather than stretching it out (see above). However, if you’re smart, you’ll give the investments to your son and the IRA to the church. The church still gets no less than $500,000 because the church pays no income taxes, and your son gets $500,000 in investments he can spend right away.

      It’s very smart to give your IRA to a charity, but be careful. It only works if your charity qualifies as tax-exempt by the IRS. And you want to give the whole account directly to the charity, taxes and all, rather than making taxable distributions to yourself and then giving the money to the charity.


Four- Split it Up

      If you want to leave your IRA to more than one person, or to a trust for the benefit of more than one person (more on that in a minute), then you should split up the account. If you don’t do it carefully, then an IRA left to John and his son John Jr. will use John’s life expectancy for both beneficiaries. The way the IRS regulates inherited IRAs, you have to take bigger distributions the closer you are to death (which according to the IRS is age 85). Since John is older, his life expectancy is shorter than Junior’s, so John’s mandatory distributions will be bigger. That means fewer funds stay in the IRA tax-deferred, and the tax benefit to John Junior is reduced.

      However, if you intentionally split the IRA into two accounts at death, one for John and one for John Junior, the separate accounting rule allows them to each use their own life expectancy for required minimum distributions. So John Junior can take substantially smaller distributions than his father, leading to overall tax savings for the family. A smart planner makes sure the account gets split between multiple beneficiaries to maximize tax savings. 


Five- Use a Trust

      Sometimes it’s smartest to leave everything to your spouse. But a lot of the time, it makes more sense to use a special, qualifying trust. It’s no wonder every professional estate planner makes a ton of trusts for clients—trusts are usually the most versatile and cost-effective way to plan where and how your wealth will be distributed when you die. It’s no different when planning where to leave your IRA.       Normally, it’s not a good idea to leave your IRA to a company, as opposed to a person. The two exceptions to this rule of thumb are charities (discussed above) and qualifying trusts. As long as your trust meets certain technical qualifications to qualify as a “conduit trust,” you can leave your IRA to your turst, the trust itself is ignored for tax purposes, and your IRA passes to whomever you designate in your trust. That way, your trust doesn’t pay income taxes.       So why is it sometimes smarter to leave your IRA to a trust than to the people you want to receive it? Three reasons:

  1. Creditor protection. If your beneficiaries have debts, a trust can protect the IRA from their creditors. Even in bankruptcy, where IRAs are usually protected, inherited IRAs are not. A trust can keep the money safe.

  2. Family complications. If you leave your IRA to your spouse and your spouse gets remarried to Jacque the pool boy, there’s nothing to stop Jacque and his kids from getting your IRA. A trust can be designed to keep the funds in your family, even if your spouse’s situation changes.  

  3. Simplicity. If you’re smart, you’re already setting up a trust to govern how your wealth is to be distributed, so why wouldn’t you want your IRA handled in the same way, as part of the same plan?

        Whenever you are planning for your future and finances, it is important to have the help of competent professionals. Contact an attorney for personalized advice and documents to get the most out of your IRA. 


Joseph D. Fairbank at 2:03 PM No Comments | Post a Comment
Estate Planning
Wednesday, July 27, 2016

Beard St. Clair Gaffney Welcomes Joseph D. Fairbank

Beard St. Clair Gaffney is pleased to announce the addition of associate Joseph D. Fairbank. Joseph’s practice focuses on estate planning and business formation and succession. A native of southwestern Montana, Joseph earned his bachelor’s degree in English from Brigham Young University in 2010. He then attended the prestigious University of Virginia School of Law. In law school, he served on two law journals, the Virginia Tax Review and the Virginia Criminal Law Journal. Joseph began his legal career in southwestern Montana, working in a general practice setting with some emphasis in Montana water law.

Staff at 9:58 AM No Comments | Post a Comment
Friday, July 15, 2016

Another fun year participating in EITC's Great Race for Education

A great cause and a lot of fun! Thanks to our runners Michael Brown, Jarin Hammer, Julie Stomper, and Paul Graslie for your heroic efforts. Also, a big thanks to our team captains Greg Calder and Kurt Krupp.
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