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Expect the unexpected

Agriculture.com Staff 08/07/2007 @ 2:25pm

Skip Lackore wanted his children to grow up on the four-generation farm near Garner, Iowa. He looked forward to walking his daughters down the aisle and providing for their weddings.

Two of his three dreams came true. When the 33-year-old farmer died from a brain tumor in 1986, the youngest of his four children, Melissa, was only 20 months old.

"He died less than a month after we found out he was sick," says Doris Dallman. "We had just bought the farm from his dad. We had no will, but term life insurance was required. I didn't think we could afford it. But it kept me on the farm with the girls and our son, Matt. Insurance also helped with their weddings."

Life insurance is a way to generate cash to pay estate and income taxes, reduce loans or debts, or partially fund purchase of a decedent's farm.

"A will controls life insurance proceeds only if the estate is the beneficiary," says Philip Harris, University of Wisconsin ag law specialist. "Check on the beneficiaries and ownership."

Doris married Kurt Dallman 16 years ago, and they retain close ties to the Lackore family. Now Doris is urging her married children to make wills and set up guardianships.

"When Skip and I were young, we thought we had all the time in the world ahead of us," she says.

Donna and Ken Pratt finalized their estate plan 10 years ago, gradually turning over the reins of their Scobey, Montana, farm to their son. At the same time, they also made plans to live to a ripe old age.

"We bought a long-term nursing home care policy for $1,400 per year for both of us," Donna says. "I begged a close friend to buy one, but her husband refused. Now he's in a nursing home that costs $4,000 per month. Our policy has gone up to $2,000 per year, but it's worth it."

The rising cost of nursing home care threatens the most carefully constructed farm succession plan.

"Long-term care insurance fits into the need to estimate living expenses for the older generation and to protect farm assets from being sold to pay nursing home costs," Harris says.

Farmers have three options: divest assets to qualify for Medicaid; retain assets and pay directly for nursing home care; or use assets to buy long-term care insurance.

Farm rent income, Social Security benefits, and other income sources are factors. So is the cost of long-term care insurance, based on your age, type of plan, and health status.

"Compare the costs and benefits of paying for three years of nursing home care with those of buying long-term care insurance," says George Twohig, Chilton, Wisconsin, attorney.

"You get a better deal when you're younger," Donna says. "Sometimes people put it off until it's too late."

Skip Lackore wanted his children to grow up on the four-generation farm near Garner, Iowa. He looked forward to walking his daughters down the aisle and providing for their weddings.

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