BEFORE WE MARRIED TWO YEARS AGO, MY HUSBAND AND I SIGNED A PREMARITAL AGREEMENT. WE EACH OWN FARMS THAT WE WANT TO GO TO OUR OWN CHILDREN. MINE IS IN A LIVING TRUST, BUT MY HUSBAND SEEMS TO THINK THAT THE AGREEMENT IS ENOUGH, WITHOUT HIS DOING A WILL TO DIRECTLY LEAVE THE FARM TO HIS CHILDREN. IS HE RIGHT?
• Very good question!
• It's possible that North Dakota's intestacy law will do what he wants done
• But he should consult an attorney
• Good estate planning can do a lot more to make sure things happen the way you want than if you just rely on a law that the legislature could choose to change
What would be your concerns or suggestions for him about his choosing to do nothing, as is presently the case?
• He's right that his kids would be his heirs under ND's intestacy statute, combined with this agreement by his wife not to claim her inheritance rights
• Or, if any of his kids die before him, their children would take the share that would have to that deceased child
• But it isn't the agreement itself that will bring that about the transfer to his heirs
• A prenup doesn't order distribution of your estate; it's not a testamentary document like a will or trust
• It just means that his wife won't claim the farm
• And there are things he could do through good estate planning that could possibly completely eliminate the need for a probate after he dies
• One example is exactly what his wife did - a living trust
• Sounds as though his wife has taken at least one major step toward eliminating a probate action for her kids to get her farm
Can you tell us again a little bit about how that works?
• ND's probate laws are simple, and the process is fairly cheap
• But if you create a living trust and transfer your property into trust ownership, there's no need for probate unless there is some property you forgot to put into the trust
• You would typically be your own initial trustee
• And would name a successor to handle distribution after you're gone
• So after you die, your successor trustee just distributes the property out of the trust to the beneficiaries, without any court involvement
• But as we've talked about before, there are other possibilities, perhaps even cheaper and simpler than the living trust
• Depends on what all he owns, of course
Remind us about those other possibilities, if you would.
• Here we don't know what he might want to be leaving to his kids other than the land, so a living trust might still be his best bet
• A farmer usually has equipment, vehicles, etc., not just land
• But for land transfers without either a probate or a trust, many people do one of two kinds of deeds
What are those, again?
• One is what's called a transfer on death deed
• You remain the sole owner during your lifetime, but your heirs named in the deed become the owners on your death
• All they have to do is record a certified copy of your death certificate with the land's legal description; no probate needed
• And a TOD deed can be easily revoked if you decide to sell during your lifetime
• Unlikely with a family farm like this, but always at least possible
• Or sometimes families have a falling out, and you might decide you want to do something different with your property after all
• This type of deed would make that easy
And what's the other kind of deed?
• With those, he would transfer what's known as the remainder interest to his children, but would retain the life estate
• That means he has full use and benefit of the land until his death, just as with the TOD deed
• I don't specialize in Medicaid planning, but some people do choose to do these deeds at a fairly young age, in order to possibly prevent the land from later being taken to pay for long-term care
• Same easy transfer of title after death as with the TOD deed
• Desirable to do early if Medicaid planning is part of his thinking, because he could not qualify for medical assistance until five years had passed after making a gift of the remainder interest in his farmland
• After five years, the transfer would not be a disqualifying transfer, so he could then presumably get medical assistance if needed
And that's not the case with the transfer on death deed, then?
• Right; the full title to the land remains in his name, so it's part of the assets that would be looked to for payment of his long-term care needs
• As I said, if there's other property - farm machinery, etc. -- a living trust might still be his best bet rather than either of these deeds
• All of his property can go into the trust for automatic distribution by the trustee later on
• I would want to get the whole picture before giving any specific advice
• But both these folks should also seriously consider powers of attorney and health care directives, because how your family inherits from you later on is only part of the picture
• And this is a second marriage, blended families, etc.
• More careful planning is usually needed to make sure that things can be handled in case of your becoming incapacitated at any point, either temporarily or permanently
• A living trust could handle any property that has been placed into it, so your incapacity wouldn't matter so much there
• But there are other needs and concerns besides financial ones for people to plan ahead for
• So I hope she will urge him to consult with an attorney, and perhaps make sure she has those other documents for herself as well