Have you ever stopped to realize that families who have no assets to pass to their kids are more likely to remain closer after the death of a parent than those who have plenty of “stuff” to worry about equaling out?
As a parent, one of your most important tasks is dealing with this issue and giving your kids the best chance at remaining a family, rather than just a group of individuals sharing the same DNA.
So, how can you pass on your legacy while keeping your family together?
Some may think the answer is giving everything away to charity so there is nothing to have disagreements about. While that might work, for many of us who have spent a lifetime building up a successful farm and taking pride in it, going to the nuclear option just doesn’t seem very feasible. So here are a few other options that will help with passing on our farming legacy and perhaps, keeping the peace.
The first key is to do something — anything is better than nothing.
Too often, parents worry about making the wrong decision or upsetting their children, so they choose to do nothing. That is literally the worst thing you can do. Leaving it to your kids to sort out after you’re gone is a recipe for disaster. But fear results in that being the go-to plan of many parents.
It’s your responsibility to decide what you want to do with your farm and put a plan in place. Trust me, I get it, it’s a hard decision. But it’s yours to make.
The process is relatively simple if you have only one child. But add one more and often even as parents, you aren’t on the same page.
Chances are only one of your multiple children really want to farm. So how do we divide it, or do we?
Write it down
You and your spouse will have to decide how important it is to you to see your farming legacy continue.
Splitting up a working farm will affect its ability to compete in a low-margin industry. Will the farm support enough debt for them to buy out their brothers and sisters? Do you give credit for “sweat equity”? And let’s face it, valuing sweat equity is a complicated issue — one I will discuss in a future column.
There are several options in the toolbox of estate planning to help us deal with the issue of fairness. Those include life insurance, buy-sell agreements, first option to buy, business entity structures, and even long-term leases. At a minimum, consider separating the land from the farming operation, so you can treat them separately and possibly use leases to tie them together if you want.
With a little planning, you can put a rock-solid plan in place that mandates the linkages between the heirs. If a child wants to cash out their portion, there should be rules by how they must do it. You get to decide what those rules are. It doesn’t even have to be at full market price, if you wish. There will be no disagreements on splits or price if you establish them now and communicate them to your kids.
I’ve coached enough families to know there is no one-size-fits-all way to pass down the farm. Every family is different. But remember, we owe our kids nothing but to love, guide and teach them how to be the adults we want them to be. What you decide to do with your farm is up to you.
Most importantly, please make those decisions now, put that plan into action, and communicate it with everyone. The best way to protect the family’s future is to make the hard decisions today.
Tucker is a University of Missouri Extension ag business specialist and succession planner. He is a fourth-generation farmer. He can be reached at email@example.com or 417-326-4916.