Dear Michael: We read your article recently about how the farming child and the non-farming children should receive equal shares. We have our son farming on the land and we feel he should get the farm and the other children the other assets we have. We've read your columns for years and have never heard you say we should treat the kids equally and we disagree with you. How come you've changed your tune? – Puzzled.
Dear Puzzled: Let me settle your puzzlement for you. I have never stated and never will state that the children off the farm should receive the same amount as the children on the farm.
What I am saying is parents need to be a little bit more practical regarding the value of their farm assets versus the value of there non-farm assets and just how much in total value is going to this one branch of the family tree. Once we know the total dollar value of these assets, we can take a practical approach to dealing with your non-farming heirs.
For example, farm clients come in all the time with sheets showing me their pastureland is worth two hundred fifty dollars and their farmland is worth four hundred dollars. When I ask if they would sell it for that price, they say 'No, no…some just sold down the road for a thousand across the board. But I wouldn't sell it to my son for that high price'.
We have three values being stated here – what the farm parents 'think' it's worth, what it's 'really' worth and what they would 'sell it to their son for'. Hovering out there on the horizon is the other value – what it's 'going' to be worth 'someday'.
As an farm estate counselor, I've sat through many meetings with heirs after a death, and when they are looking at the estate and what they will each receive, they are not looking at numbers based on 'what I think it's worth' or 'what I would have sold it to my son for' numbers, Normally, they are looking at appraisals and that's when the fireworks begin to fly around the room.
In order to get a sense of what the farm parent's farming child will someday face, I use a simple graph with a line across the top of the page and vertical lines to accommodate the names of each child. On the left hand side are all the assets and their value. Under land, we put the 'what it's worth value'. Below that, we then put the County Average for Like Land put out by the County Agents and NDSU. Below that we put the value for the land which would represent what their land would sell for in their area based on the current market conditions – such as what would the last crowd they saw at a land auction bid their land up to.
As you know, this last number can be the 'doozy' in the bunch. Below that we put the farm machinery, livestock, and other farm assets. Next we put all of the value of the non-farm assets such as savings accounts, retirement accounts or investment accounts.
Everything looks pretty good until we do the division. Remember, all of the non-farm assets have to be divided between the non-farming heirs whereas if you have only one farming child, there is no division. If you have three or four kids and you've got a million dollars in cash laying around, you fell pretty good until you realize each non-farm kid is getting two hundred and fifty thousand versus the farm heir who's getting one to two million.
This is merely a 'perspective' exercise – a look into the future of what the 'perspective' of what it will be like for your farming child someday as he's sitting across the table from his brother, sisters and other family members and comparing numbers.
Many people say the non-farm children will never know what these values are…but in the age of computers, information, and just plain asking around, it won't take Sherlock Holmes to put the numbers together for any of these non-farm kids.
Many parents choose to 'kick this can down the road' onto the farming child's lap and leave him or her to deal with it after they're dead. In fact, some people refuse to tell me what they have in farm acres or pasture acres just so we can't do the aforementioned exercise and they don't have to face reality. As a financial counselor, I know you need to see the numbers and put yourself into your farming child's place when you die and realize what kind of rancor he might encounter. For those who won't, there's really not much I can do for them.
There are many, many things you can do to mitigate this issue down the road and we'll get into this in following columns so you won't leave your farming child hung up on a barbeque spit over hot coals down the road.
The first thing is for a family to deal with the 'reality' of the numbers today, however. For those who refuse to do this will find reality doesn't really care if you did or didn't take the time to do this- it'll bite you anyway. It always does.