Dear Michael: We read with interest your article last week as to how to keep our children who are not farming happy with the child who's on the farm – both now and when we die. What other things can we do to make certain we keep family harmony after our deaths? – Hoping for Harmony.
Dear Harmony: As I stated in my last article, there's a number of things you can do to make certain the family harmony is not disrupted after your deaths.
The hardest part of this is to communicate with one another – both with the farming child and with the non-farming children. If you want to keep family harmony, things have to be discussed with the children. This doesn't have to be daily or weekly – but when big changes occur on the farm operation – such as your retirement, or the transfer of the equipment to the farming child, sale of farmland to the farming child, or any other major changes in the operation – give the kids off the farm a heads up about the change in operation.
You won't need to go into too much detail – only what you feel comfortable with – but it's good for the children off the farm to understand your business of farming is not a static business. It's constantly in motion, with assets changing hands, operations changing, retirement occurring, and management changes – all things that occur in any business or industry across the country.
The non-farm children need to perceive your farm business the way your farm business truly is – a multi-million dollar business that depends on new investment, labor, inputs, and attention to detail. They have to understand that you and your farming child make a million dollar gamble every year in hope of receiving a profit on your business each year.
The more they realize they are not part of the ongoing business, the easier it is for them to understand why the child, who was integral to the growth in the business, would receive a larger share of the business.
The next thing to do is actually get some of the assets in motion – especially the transient assets – such as machinery, buildings needing to be added on or replaced, livestock, grain, etc. If you look at your bank assets and liabilities form, they are the assets listed as short term and mid-term – with the exception of your own personal savings, checking, etc.
These assets are the assets, which are here today, but will be replaced in the future – either right away in the case of production sales, or within the next few years, as in the case of machinery or livestock. From the time you turn fifty-five to age seventy, these assets need to transfer from your ownership over to your farming child's ownership.
How? Easy enough. When a piece of equipment needs replacing, put it in your farming son's name. You'll need to change your farming operation so that s/he has enough income to meet those payments, so maybe turn over some of the rented land to him..or let him rent some of your land. It's all inside one operation, typically, and you just need to redirect how the income comes in to whom and who is responsible for the payments on the replacement equipment. Done successfully, you'll be driving your farming child's equipment in a few years rather than him driving yours.
The hardest part is just letting go and letting the next generation take over. I know it's fun right now – with the profitability in agriculture lately – to finally get to buy that new piece of equipment you always wanted. But if you're planning ahead, you'll let your farming child buy it in his name.
The long-term results of transitioning these type of assets is upon your death, we won't have the non-farming children questioning why the farming child received all of these assets – assets vital to the continuance of the family farm. Nor will the farming child have to worry about buying out a larger and larger share of his non-farming siblings share of the machinery, livestock and other transitory assets if you continue to accumulate these assets past the age of fifty-five.
Last, but not least, tell the children off the farm these changes are occurring. In casual conversation, mention the 'big tractor', or the combine, or the seeder, are now owned by your farming child. Tell them how much the new piece of equipment costs and how grateful you are Jr. bought this equipment and you get to use it for free for a change.
All these little steps are all building up to the day when the children get to sit around the table and discuss the estate. If you've kept a curtain of silence and secrecy around your ongoing operation, expect your children to have some discord about why they're getting what they are getting. The best answer your farming child can give to his siblings, as to why he owns something is to say 'I bought it and I paid for it – that's why!'
More ideas next week on keeping family harmony and Keeping the Family Farm in the Family!