Dear Michael:

We have a son who is farming with us, and we would like him to receive the farm while our other children receive our savings. We’ve saved a sufficient amount of money earmarked to go to our three non-farming children.

However, me being the wife of a farmer, I found that my husband always seems to be using this money for other purposes. Two years ago, he bought a new tractor. This year, some land came up for sale that he’s always wanted to buy, and now those savings don’t exist in our estate any longer. We’re both approaching our seventies, so I don’t know how much time we have left to replenish this for our daughters. My husband says ‘Don’t worry, we’ll put the money away again like we always do,’ but every time we do, he finds another reason to spend it again.

Any suggestions?

– Married to a Farmer

Dear Married to a Farmer:

This is why I think farmers of today are the best business owners in the world. They know how to reinvest and reinvest and reinvest in their business and make it grow. Even during hard times, they can find the money or the collateral to make expansions in their farm operation. They are ferocious about grabbing that piece of land that fits in or that they’ve been farming for years. I’d be afraid to get my fingers snapped off if I got in the way of that transaction.

However, if you look at your estate from an estate planning standpoint, you see two distinct groups as beneficiaries of your estate: Your farming child, who receives farm assets and your non-farming children who will receive something other.

If you were to track your estate over the years as purely two parts (farm and non-farm), you would see vast amounts of reinvestments going into the farming child’s estate inheritance and often the amounts set aside for the non-farming children are not only not being added to but are often ‘raided’ to increase the farming operation.

This is all a bit tongue in cheek, but I think you understand my inference.

There’s always that farmer – who’s survived all kinds of perils throughout his career – who has a balance sheet he could never have dreamed of when he was young and struggling.

Sometimes, because of all the adversity he has survived and come out of bigger and stronger, he starts to believe that he will always come out on top.

This may be true of the farming operation. Most farmers go to great lengths to protect their farm assets from loss. They pay staggering amounts in insurance premiums to cover their crops, their machinery, their buildings. They set up all kinds of methods to protect the farmland from estate taxes or long-term care costs.

However, the ‘estate’ set up for the non-farming children often gets treated like the red-headed stepchild of the estate. These ‘inheritances’ are often used for other purposes, much like your husband does for land purchases, improvements to the farm and other things that benefit the farming child. Not so much for the other children.

This exacerbates over time as the farm assets escalate in value while the non-farming children’s inheritance suffers from loss of compounding.
These funds are also the first line of defense if either of you needs long-term care. Hopefully, you have enough income to meet the costs of care if needed, but if not, these are the first funds spent.

A lot of non-farm heirs are upset their inheritance went to the nursing home.

Just like the farm assets, these assets or inheritances need to be guaranteed. The savings need to be secured, the non-farm inheritances need to be guaranteed, and the farming child’s ability to meet demands from the non-farm heirs needs to be guaranteed.

Sooner or later, life catches up with all of us one way or another. You’d hate to see three of your kids get nothing because all the money’s been spent on guaranteeing farm assets and none at all on ensuring the non-farm inheritances.