Protect Your Operation From Disability

Amy Timmerman - Extension Educator Author

12/29/2023 Added

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Estate and transition planning often focuses on what happens to the farm or ranch at the death of a key person. However, a good estate and transition plan should also include contingencies for disability. Planning for a disability is not an easy task because the severity and duration of the disability are unknown.

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[00:00:00.487]This is Amy Timmerman with Nebraska Extension.
[00:00:03.982]Estate and transition planning often focuses on what happens
[00:00:07.242]to the farm or ranch at the death of a key person.
[00:00:09.998]However, a good estate and transition plan
[00:00:12.478]should also include contingencies for disability.
[00:00:15.363]Planning for a disability is not an easy task
[00:00:17.923]because the severity and duration of the disability are unknown.
[00:00:21.680]Here are seven key items to have in place to protect
[00:00:24.500]you and your operation from disability:
[00:00:27.285]1. A contingency plan for labor.
[00:00:29.593]Who will be responsible for taking on the additional work?
[00:00:32.557]Short-term or long-term, the work must get done.
[00:00:35.855]Does your operation have a contingency plan?
[00:00:38.533]All employees should be cross-trained in multiple roles within the operation.
[00:00:42.723]The operation should also be financially prepared
[00:00:45.557]to hire additional labor or outsource when possible
[00:00:48.922]2. An emergency fund.
[00:00:50.942]A disability may bring not only medical expenses but also a loss of income.
[00:00:55.702]Most financial advisors recommend 3-6 months of
[00:00:58.793]expenses saved in a liquid account for emergencies.
[00:01:02.347]3. A legal entity that protects your farm or ranch assets.
[00:01:06.680]How is your operation protected from individual medical debt?
[00:01:10.381]The reality is that disability is often preceded by a medical emergency.
[00:01:14.781]One way to protect a farm or ranch is to organize it as its own legal entity,
[00:01:19.441]such as an LLC or S corporation so that creditors cannot seize the assets.
[00:01:24.501]If the farm or ranch is a separate legal entity,
[00:01:27.313]it is imperative that its bylaws are followed such as
[00:01:29.940]separate bank accounts and annual meetings.
[00:01:32.290]If a creditor sees that it is not being treated
[00:01:34.657]as a separate entity, they may try to seize the assets.
[00:01:38.126]4. Power of Attorney.
[00:01:40.684]Who can make business and financial decisions?
[00:01:43.248]A Power of Attorney (POA) allows you to designate a trusted
[00:01:46.317]person (an agent) to make financial or business decisions on your behalf
[00:01:50.628]while you are alive but unable to make these decisions yourself.
[00:01:54.378]This power can be limited to specific decisions or
[00:01:57.281]situations, such as mental incapacity.
[00:02:01.111]A Power of Attorney expires at death.
[00:02:03.411]Each member of the operation should have a Power of Attorney in place.
[00:02:07.937]5. Living Will or Advanced Medical Directive and
[00:02:10.677]Power of Attorney for Healthcare.
[00:02:13.676]One of the most difficult decisions to make is your wishes for medical care.
[00:02:17.605]In a “Living Will” or “Advanced Medical Directive” you will outline
[00:02:21.206]what types of medical care you want to receive when
[00:02:24.262]you are unable to make them yourself, such as life support.
[00:02:27.502]In addition to this document, you should also appoint a
[00:02:30.602]Power of Attorney for Healthcare.
[00:02:32.782]This person does not have to be the same person who you chose
[00:02:35.872]to handle your business affairs.
[00:02:38.381]6. A buy-sell agreement with provisions for disability.
[00:02:41.898]What mechanisms are available to transfer after disability but before death?
[00:02:46.983]If you have legal documents in place that outline conditions for the sale
[00:02:50.537]or transfer of assets at death, make sure they also define the terms for disability.
[00:02:55.507]For example, a buy-sell agreement may allow a disabled person to sell
[00:03:00.507]assets at the time of their disability rather than waiting for death.
[00:03:04.258]7. Disability Insurance.
[00:03:06.784]The reality is that disability insurance for farmers and
[00:03:09.778]ranchers may not be cost-effective.
[00:03:12.256]However, Social Security may provide disability benefits
[00:03:15.586]if you become severely disabled.
[00:03:18.306]In order to qualify for Social Security, you must pay Social
[00:03:21.156]Security/Self Employment taxes for a certain length of time.
[00:03:25.156]Showing little or no profit year after year means that you may not be
[00:03:28.406]qualifying for Social Security benefits.
[00:03:31.296]See if you qualify for Social Security you go to www.ssa.gov/myaccount.
[00:03:39.622]Changing the legal structure of the farm or ranch business,
[00:03:42.682]establishing powers of attorney, and incorporating the possibility
[00:03:45.834]of disability into your estate plan requires professional legal assistance.
[00:03:49.834]Discuss these issues with your attorney and financial advisor in developing
[00:03:53.834]your own plan for preparing for the possibility of disability.
[00:03:57.514]If you, or someone you know has become disabled, there are resources available
[00:04:01.272]to help you continue to farm or ranch through AgrAbility.
[00:04:05.426]AgrAbility’s mission is to enhance quality of life for farmers, ranchers,
[00:04:09.426]and other agricultural workers with disabilities, so that they, their
[00:04:13.756]families, and their communities continue to succeed in rural America.
[00:04:17.556]For this target audience, “success” may be defined by
[00:04:20.277]many parameters, including gainful employment in production
[00:04:23.877]agriculture or a related occupation; access to appropriate assistive
[00:04:28.400]technology needed for work and daily living activities; evidence-based
[00:04:32.838]information related to the treatment and rehabilitation of disabling conditions;
[00:04:39.132]and targeted support for family caregivers of AgrAbility customers.
[00:04:43.642]For more information about AgrAbility in Nebraska
[00:04:46.262]visit agrability.unl.edu.
[00:04:48.545]This has been Amy Timmerman with Nebraska Extension

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Protect Your Operation From Disability

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