Dear Michael:

We read your recent column discussing family ownership plans with some interest. We have three children who get along very good right now. Two are married and one is single and I think they will always get along. Does this prevent them from fighting in the future? One farms with us now, but he is the single one and we don’t know if he will ever have children of his own.

What should we have in our agreement?

– Like The Idea

Dear Like The Idea:

Many parents could look at their children today, and picture them all getting along forever. Many people tell me their children will be able to work things out in the future without any issues.

I respond to these people with this question: “How would you like to be partners in the ownership of your land right now with your siblings?” Most people pause for a second or so as they contemplate their current relationships with their siblings, and even if those relationships are in good standing at this point in time, most reply, “No, I wouldn’t want to be partners with them!”

Some even go as far as saying, “I’m not even sure I want to be family with them anymore,” somewhat jokingly.

Having a family ownership meeting where all parties involved sit down and hash out how they can avoid issues in the future is so beneficial. Whether or not the agreement they come to at that meeting is documented and signed is legally binding, is questionable. However, if you have a will that states the same thing as the family ownership agreement, you now have two documents to back up your estate plan. That’s more powerful than just having a will.

What kind of things are covered in the family agreement? There’s the small stuff, such as answering question like “Is the farming child going to buy the machinery from dad and mom, or from mom if dad dies? From the estate if both are gone? How is it going to be valued, what terms are there, etc.?” We have to have a discussion about all of these items that are on the land – including buildings, grain held, tools, all the day-to-day things involved in farming. Hopefully, most of these items are owned by the farming child by the time of the second death, but if not, the kids should agree today how this will be handled.

Next we get into discussions about the land ownership. In your situation, if the farming child has no bloodline heirs, there’s quite a discussion about what will happen to the land upon his or her death. Some parents set up ownership so the children own the land jointly, but this could be a huge mistake, as the farming child won’t have any collateral to borrow money against if the land is in all their names.

Each of them would have to sign for any loans against the land. I can’t think of anything worse than having to go to your siblings for permission to borrow against the land, other than having one of them turn you down. Inevitably, the non-farm siblings will be knee-deep in the business of farming or in the farmer’s business.

Perhaps a division of the farmland is in order with all the children agreeing if they rent, they rent to the farming child at a certain rate (County Average, Township average, etc.) as long as the farming child continuously rents the property. If he should not rent it one year, then it becomes open to rent to anyone.

Also, a notice must be given to the farming child of any intent to sell giving six months to a year notice. Some parents go as far as insisting the land cannot be sold until the farming child’s career is finished, or twenty years past the date of last death or whatever is best for the individual situation.

Again, valuation methods and terms have to be stated in the agreement.

It might also state if the farming child dies without leaving heirs that any portion he owns returns to the siblings or the children of the siblings. This might make it more feasible for non-farming siblings to give the farm child a bigger chunk of land to work with.

Everyone comes up with different solutions when they have these family meetings. The best thing I like is when the parents leave the meeting smiling, knowing their children agreed to these terms and everyone is happy, rather than leaving a will behind that might make someone unhappy. Which is the single biggest reason people don’t do wills.