Dear Michael: We have had a working relationship with our son for the past twenty years. We received some good news when they built wind towers on our farm about three years ago. It has certainly helped on the income side for our farm operation. However, our other children have expressed they think some of this income should come their way upon our death and it shouldn’t all go to Jr. We know how much it has meant to us during short times.
How do we explain to the other kids this belongs with the farm?
– Windy Times
It’s really your property and you can dispose of as you wish. I like the fact you are sitting down and explaining to all of the children how your farm estate and non-farm estate is going to be handled.
First of all, as I understand it, all income paid must go to the landowner from any company paying rent on these sites. If the land is owned by your son after you die via your estate plan, the wind company has no choice but to pay him.
I have had some cases where we have taken into account how much and what type of farm land is going to be lost due to this easement.
If the land is in a pasture, then the economic loss to your son would be negligible as livestock don’t seem to have a problem grazing right up to the wind tower sites.
If the project goes across prime farmland and disrupts the farming operation in a significant manner, then the son would suffer a greater economic loss.
We then take the land and put it into a limited partnership including all of the family members. Based on the income lost to the farming son, we take a percentage of the LLP ownership and give the son enough percentage to equal the farm income lost to make him whole again. Then the remainder we split between all of the children equally – including the farming son as to this point in time he is just breaking even.
Depending on the type of land and the loss of income to the farming son, he may end up with a much higher percentage than the others or if it’s grazing land, then his percentage may not be that much different.
You can also put into the LLP that if your son should die and leave no farming heirs, his share would then be equalized with the other children so all of the grandchildren – someday – receive an even split from this income
You can set the terms of the Limited Liability Partnership (LLP) any way your heart desires. You design what happens for now (you get the income) and what happens when you die and even what happens when your children die.
Settling these issues today while you’re still alive and coming up with an equitable solution for everyone is certainly the way to keep the kids talking to each other down the road. I have seen these relatively ‘small’ issues rip families apart after the death of the parents as the other children just can’t seem to get it through their heads how wind provides income to one of them and not all of them. Perhaps they have a point.
If your son decided to go into farming, then farming is his business for better or for worse. He takes the business over with its ups and the downs – like any small business – and makes or breaks it on his own merit. I know the wind income has been a windfall for you – pardon the pun – but it really didn’t come from the business of farming.
Settling things like this now with an open discussion with all of your children is like adding oil to a well-tuned engine – that engine being your estate plan. Sit down with your clan with a good estate planner who can explain all the in’s and out’s of such a plan to you. If you don’t know of one, I can think of a good one!