Financial pitfalls can be avoided

Published Jan. 4, 2020

“The U.S. Department of Agriculture published an article stating through the years 2019 and 2020, 93 million acres of ag land will be changing hands. This means everyone needs to be prepared,” stated Joe Farley, associate advisor at Markle Financial.

Farley, alongside Pepper Jo Six, director of development and charitable giving at Markle Financial, addressed attendees about avoiding common pitfalls in financial planning for future generations during the Wyoming Stock Growers Association Winter Roundup Convention and Trade Show in Casper Dec. 9-11 in Casper.

The whole tribe

            Six told attendees if they didn’t take anything else away from their breakout-session talk, she at least wanted them to remember the term “teamwork.” 

            “Successful succession planning really takes the whole tribe and the whole village, especially on farms and ranches because they are so complicated,” she stated, noting it not only takes the family involved but a team consisting of a financial advisor, lawyer and certified public accountant (CPA) as well. 

            “It takes the whole team because we all look at things a little bit differently,” Farley explained. “The attorney looks into the estate plan and the wording, the CPA looks at the money for the year, and the financial planners look at the money for the year as well as 15 years down the road.” 

Establishing trust

            Following their advice on utilizing the whole team, Farley noted many people are hesitant to utilize lawyers, financial planners and CPAs because they don’t trust them. 

            “The field of law and financial planning is a shame,” admitted Farley. “We have clients come in who are nervous to trust us because they have been around the ringer.”

            He continued, “We started by saying it takes a team but they have to be a good team, a trustworthy team.”

            Farley suggested one way to find trustworthy teammates is to ask neighbors and friends who have been in the same situation. 

            Six chimed in stating it is usually fairly obvious to determine the people who care about an individual’s best interest versus those who do not. 

            “The lawyers, CPAs and financial planners should be asking more questions, and better questions for that matter, if they have some skin in the game,” she said. 

            Farley noted there is a standard for attorneys in which they should be acting in the client’s best interest. This is known as fiduciary. 

            “Any good financial planner will have a broker check where people can put claims out about them,” Farley added. “This is a good place to start.” 

Common pitfalls

            “Our talk is specifically on the pitfalls of financial planning,” stated Farley. “One of the biggest pitfalls is joint ownership.”

Farley explained many people don’t make financial planning a priority because they share the operation with their spouse. However, he noted at Markle Financial they have seen many cases where the spouse who is left behind doesn’t share the same vision as the spouse who passed away, which leads to a family feud.

According to Six, another pitfall is failing to establish power of attorney (POA). 

 “We don’t mean to scare everyone but we want to talk about the worst case scenario,” Six added. “One of our clients had a big ranch in Steamboat Springs, Colo. and he didn’t have a true estate plan figured out. He also didn’t have power of attorney.”

She continued, “Later on, dementia set in, he was moved to a care home and they ruled him unable to make his own decisions. Since he didn’t have power of attorney, the son wasn’t able to pay for the care center with his dad’s money and they had to pay for several lawyers so he wouldn’t be booted from the home.” 

Avoiding pitfalls

Six and Farley ended their talk by encouraging individuals to take action early and by making some suggestions on what they can start doing now. 

“It is hard to provide general advice because every single operation is different,” said Farley. “The most important thing to do is get the right people around the table.”

Six and Farley made the suggestion of setting up trusts. Farley also noted individuals can set up limited liability companies (LLC). 

Six reiterated the importance of power of attorney stating, “I want to stress the importance of the power of attorney. Getting power of attorney early on is incredibly valuable.” 

Farley added, “Something the younger generation might want to consider is this concept known as ‘pay yourself first.’ This means, every year, they set aside some money so the ranch doesn’t have to be their only retirement vehicle. They then need to recognize, even in drought years they don’t touch that money. It is put away for retirement and retirement only.” 

Hannah Bugas is the assistant editor for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.