Farm Estate and Succession Planning
This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.
“Don’t Worry. . .This Will All Be Yours Someday.” Are You Sure? Importance of Estate Planning
May 19, 2014
"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. Or, anytime the topic of farm estate planning comes up, it is immediately ended by the parents, saying "I got it when Grandpa left, and you’ll get it too." The conversation ends there. However, if the right documentation is not completed to ensure this is the case (ESTATE PLANNING), the farming child may be 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. It is crucial that your family – mom and dad – have made a plan that meets their needs, and distributes their assets in a fair and equitable manner, considering the contributions of the farming child.
Moreover, it is often good for parents to share this plan with all of their kids – farming and non-farming. Sharing is not required; however, often it assures that there is no question the plan is mom and dad’s plan, and not the farming child’s "doing" or "fault." On the other hand, sharing could lead to a slippery slope where arguments erupt. However, everyone "knows" the plan. Regardless of whether it’s shared or not: estate planning is a must.