Protect Your Operation From Disability - December 28, 2023 - Amy Timmerman - Extension Educator
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- [0:00] This is Amy Timmerman with Nebraska Extension.
- [0:03] Estate and transition planning often focuses on what happens
- [0:07] to the farm or ranch at the death of a key person.
- [0:09] However, a good estate and transition plan
- [0:12] should also include contingencies for disability.
- [0:15] Planning for a disability is not an easy task
- [0:17] because the severity and duration of the disability are unknown.
- [0:21] Here are seven key items to have in place to protect
- [0:24] you and your operation from disability:
- [0:27] 1. A contingency plan for labor.
- [0:29] Who will be responsible for taking on the additional work?
- [0:32] Short-term or long-term, the work must get done.
- [0:35] Does your operation have a contingency plan?
- [0:38] All employees should be cross-trained in multiple roles within the operation.
- [0:42] The operation should also be financially prepared
- [0:45] to hire additional labor or outsource when possible
- [0:48] 2. An emergency fund.
- [0:50] A disability may bring not only medical expenses but also a loss of income.
- [0:55] Most financial advisors recommend 3-6 months of
- [0:58] expenses saved in a liquid account for emergencies.
- [1:02] 3. A legal entity that protects your farm or ranch assets.
- [1:06] How is your operation protected from individual medical debt?
- [1:10] The reality is that disability is often preceded by a medical emergency.
- [1:14] One way to protect a farm or ranch is to organize it as its own legal entity,
- [1:19] such as an LLC or S corporation so that creditors cannot seize the assets.
- [1:24] If the farm or ranch is a separate legal entity,
- [1:27] it is imperative that its bylaws are followed such as
- [1:29] separate bank accounts and annual meetings.
- [1:32] If a creditor sees that it is not being treated
- [1:34] as a separate entity, they may try to seize the assets.
- [1:38] 4. Power of Attorney.
- [1:40] Who can make business and financial decisions?
- [1:43] A Power of Attorney (POA) allows you to designate a trusted
- [1:46] person (an agent) to make financial or business decisions on your behalf
- [1:50] while you are alive but unable to make these decisions yourself.
- [1:54] This power can be limited to specific decisions or
- [1:57] situations, such as mental incapacity.
- [2:01] A Power of Attorney expires at death.
- [2:03] Each member of the operation should have a Power of Attorney in place.
- [2:07] 5. Living Will or Advanced Medical Directive and
- [2:10] Power of Attorney for Healthcare.
- [2:13] One of the most difficult decisions to make is your wishes for medical care.
- [2:17] In a “Living Will” or “Advanced Medical Directive” you will outline
- [2:21] what types of medical care you want to receive when
- [2:24] you are unable to make them yourself, such as life support.
- [2:27] In addition to this document, you should also appoint a
- [2:30] Power of Attorney for Healthcare.
- [2:32] This person does not have to be the same person who you chose
- [2:35] to handle your business affairs.
- [2:38] 6. A buy-sell agreement with provisions for disability.
- [2:41] What mechanisms are available to transfer after disability but before death?
- [2:46] If you have legal documents in place that outline conditions for the sale
- [2:50] or transfer of assets at death, make sure they also define the terms for disability.
- [2:55] For example, a buy-sell agreement may allow a disabled person to sell
- [3:00] assets at the time of their disability rather than waiting for death.
- [3:04] 7. Disability Insurance.
- [3:06] The reality is that disability insurance for farmers and
- [3:09] ranchers may not be cost-effective.
- [3:12] However, Social Security may provide disability benefits
- [3:15] if you become severely disabled.
- [3:18] In order to qualify for Social Security, you must pay Social
- [3:21] Security/Self Employment taxes for a certain length of time.
- [3:25] Showing little or no profit year after year means that you may not be
- [3:28] qualifying for Social Security benefits.
- [3:31] See if you qualify for Social Security you go to www.ssa.gov/myaccount.
- [3:39] Changing the legal structure of the farm or ranch business,
- [3:42] establishing powers of attorney, and incorporating the possibility
- [3:45] of disability into your estate plan requires professional legal assistance.
- [3:49] Discuss these issues with your attorney and financial advisor in developing
- [3:53] your own plan for preparing for the possibility of disability.
- [3:57] If you, or someone you know has become disabled, there are resources available
- [4:01] to help you continue to farm or ranch through AgrAbility.
- [4:05] AgrAbility’s mission is to enhance quality of life for farmers, ranchers,
- [4:09] and other agricultural workers with disabilities, so that they, their
- [4:13] families, and their communities continue to succeed in rural America.
- [4:17] For this target audience, “success” may be defined by
- [4:20] many parameters, including gainful employment in production
- [4:23] agriculture or a related occupation; access to appropriate assistive
- [4:28] technology needed for work and daily living activities; evidence-based
- [4:32] information related to the treatment and rehabilitation of disabling conditions;
- [4:39] and targeted support for family caregivers of AgrAbility customers.
- [4:43] For more information about AgrAbility in Nebraska
- [4:46] visit agrability.unl.edu.
- [4:48] This has been Amy Timmerman with Nebraska Extension.