John and Mary Carson came to me with what may be a unique problem–or maybe a future trend.
“Our son, Marvin, came to work us about six years ago. He brought his wife and his two children to the farm. Of course, we had more than enough work and enough income to go around,” John said. “But now, times are changing and I'm not sure if Marv came back to farm or if he came back because prices were so good then!”
Mary chimed in, “The first couple years were great. But then Marv's wife, Alberta, decided they needed a big new home. Next thing we know they are plotting out and building a home so big our house could fit inside of it. They drive better vehicles than we have. Kids these days don't want to start the way their parents did–small, and work your way up. They want to start at the top!”
John said, “Since the prices were a little tough last year, we noticed things are not going quite as smoothly as they did before. Marv's a lot more short-tempered with everyone and Alberta doesn't want to talk to us anymore. I know you said you've got to have a will to help out these kids–so we talked to our attorney making certain Marv gets the lion's share of the property. Now we're not so certain we did the right thing.”
Farming is easy and fun when prices are good, the weather cooperates, and there's all kinds of money to go around. However, as in any business cycle–mine included–there are ups and downs. A lot of second generation children came back to farming, either on their own or at the urging of the parents, and now we've entered a new and different financial cycle.
Unfortunately, if the first six years of your business experience shows you that you can do no wrong and money almost literally grows out of the ground, it's not going to give you a very good long-term perspective on business on the whole and farming in particular. Being young and not having lived through the financial difficulties of the eighties and nineties when times were tough gives the next generation a feeling of being ten foot tall and bullet proof.
“What was the reason Alberta's not talking to you?” I asked John and Mary.
Mary replied, “Well, when they were building that new home we tried to tell the kids not to go overboard, but Alberta wanted what she wanted. We kept trying to tell them to slow down a bit and, finally, she told us she was tired of us ‘meddling' in their lives. Now we barely get to see the grandkids anymore, unless Marv brings them around,” as she wiped a tear away.
“Family difficulties aside, perhaps it's time to go visit with the attorney again, John and Mary. Based on what you've told me, Marv gets most of the land and machinery while you're other children only get a percentage of what Marv will get.”
“Perhaps you need to think about a clause that says something like, ‘Marv must be actively farming at the time of our death(s) and continue to actively farm for at least ten years after our death in order to maintain his share. If he does not, then the farm shall be divided equally between all of your children, or maybe Marv gets a slightly bigger share than the others’.”
“That way, if you two should die, and Marv and Alberta decide farming isn't the life for them, they can't put the whole thing up for sale, reap in millions of dollars on the sale of land and machinery and leave the other children in the lurch.”
Any business will go through times in the crucible–times when we find out the true metal of the people in that business. Some of these children will adapt to the times and other children will find that this life isn't what they thought it would be and leave.
Whichever the case, you need to add some clauses to your will that will handle whichever fork in the road they decide to take–if that should happen after your death.
Michael Baron is the owner of Great Plains Diversified Services, Inc. and is a regular contributor to the "Farm And Livestock Directory". Involved in farm estate planning for more than thirty years, Michael Baron is well-versed in farm income taxation, estate taxation, retirement planning, transition planning, oil and gas estate issues, and all other issues facing the family farm, including family dynamics. Presented in a comprehensive, down-to-earth 'question and answer" format, the topics addressed in this column talk about the many aspects of estate planning – and how to 'Keep the Family Farm in the Family'. Contact Michael Baron at [email protected].