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Farm Estate and Succession Planning

RSS By: Andrew Zenk

This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.

Andy is an Agribusiness Consultant for AgCountry Farm Credit Services, Fargo N.D., a farmer owned cooperative and part of the Farm Credit System serving eastern North Dakota and northwest and west central Minnesota.

“Don’t Worry . . . This Will All Be Yours Someday.”

Nov 08, 2011

 

“Don’t Worry . . . This Will All Be Yours Someday.” This statement is very common on family farms; spoken by a parent to their farming child, giving the child assurances that their hard work and effort on the farm will not be forgotten. However, if the right documentation is not completed (ESTATE PLANNING), the farming child is likely in trouble. 
 
Picture this scenario: A mother and father have three children, and farm. When the kids are young, they do the “responsible thing” and have a will made primarily to determine who their children’s legal guardian would be, should they both have an untimely passing. Also, “general language” in the will states that all of the assets first go to the surviving spouse, and then equally to all children. The wills are signed, and put away. 
 
Years pass. The family’s children all grow up and two of them go off to college, work hard and get good jobs. One child stays on the farm and works with mom and dad, helping them grow the farm and ensure its continued viability and profitability. The farming child works very hard and gets paid; although not any more than a general farm laborer. He is always told by his parents “Don’t worry – this will all be yours someday.” “You are working hard, and we want the farm to be yours.” Mom and dad say this, but the same wills that they drafted years ago remain put away. No changes are made reflecting their statements to the farming child. 
 
Years later, dad passes away. His estate passes everything to mom, including the land, the machinery and the farm site. The farming child – who has been farming for decades now – talks to his mother about estate planning. He reminds her on what they’ve always said “Don’t worry . . . this will all be yours someday.” Mom doesn’t change her will. She puts it off, as many do. Few want to think about their own mortality, especially after losing a loved one. Her will from years ago stays valid and put away. The farming child continues to work. He’s worried, but relying on what he was told. 
 
More years pass, and during a family get together, one of the non-farming children talk about their mother’s estate planning. They wonder “what it is.” The farming child speaks up and talks about what he has always been told: the farm will be his someday. The three non-farming children are shocked and arguments erupt. All sorts of statements are made regarding what their dad presumably “told them” and it was not at all consistent with what he told the farming child for years. 
 
The arguments continue and all of the children – including the farming child look to their mother to make the decision. Mom knows what was said to the farming child. At the same time, she does not want to upset her other children. She is getting pressured and pulled in different directions. What will she decide? Will she do anything at all? The future of the farming child’s career and all of the work and effort they put in to making the farm what it is today is in jeopardy. The farming child’s worst fears have come true. 
 

Do you see yourself in this story? Have you been told “Don’t worry . . . this will all be yours someday.”? If so, it is absolutely crucial that you ensure the proper estate planning is completed so that those words are reality, when the time comes. Estate planning is a must.

 

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Disclaimer: The information contained in this publication provides a general overview on various topics and is strictly for informational purposes only. The reader should consult a qualified professional for advice based on his/her specific circumstances. AgCountry Farm Credit Services and the writer of this blog make no representations as to the accuracy or completeness of any information on this site or found by following any link on this site, and shall not be liable for any errors or omissions herein or for any losses or damages resulting from the display or use of this information. 
 
Required Disclosure Pursuant to IRS Circular 230: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code; or (2) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.
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