There are two general kinds of property, called “real property” and “personal property.” Real property consists of land and the permanent improvements on it. Personal property includes movable items. Personal property may include tangible objects such as livestock, machinery, and household goods or intangibles such as bank accounts, bonds, stocks, and negotiable notes. The law makes a distinction between real and personal property in matters of inheritance, sale, and mortgage. Also, tax laws and assessments are applied differently to each of these two kinds of property.
Objectives in estate planning will vary from family to family, due to differences in resources, number of children, and value judgments. Clarifying the objectives is one of the first steps in logical, systematic estate planning. Objectives often listed by families may include one or more of the following:
• To provide sufficient income to the parents for the rest of their lives.
• To reduce state and federal estate and gift taxes.
• To reduce lawyers’ fees, probate costs, and other fees.
• To reduce income taxes.
• To minimize disruption during estate settlement.
• To treat all children equitably, not necessarily equally.
• To keep the farm in the family.
• To help one or more of the children to start farming.
• To maintain and continue an efficient operating unit.
• To reward certain children for specific contributions they have made to the parents or to the estate.
• To provide for special needs of some heirs.
• To inform heirs what to expect, so they can make plans accordingly.
The fact that two or more objectives conflict should not deter families from making plans. It is in such cases that planning is most needed. Usually some compromises among the conflicting or competing objectives will have to be made, and it may be impossible to develop fully satisfactory plans. But the results of good planning will be far superior to unplanned property transfers.