Wow, this is becoming a BIG question! Years ago, most estate or financial planning was a very secretive issue that was not shared with anyone. Fortunately, for the next generation in agriculture, many in the older generation have now started to recognize the importance of communicating their farm continuation plan to at least their farming heirs. But what about the non-farming heirs? Should they be informed of the plan? If so, when and how?
That is an interesting question in today’s “right to know” society. Americans have come to believe that it is our right to know everything about everything and that we can demand an explanation wherever and whenever we choose. This has made for very interesting situations in farm continuation planning, especially when the plan expresses the wishes of Mom and Dad and they don’t really want the plan broadcast to the community.
A question I often ask Mom and Dad early in planning is what the fair market value is for land in their area. Often they will shake their heads and grumble that land is $8,000 per acre or more and suggest this is too much, it doesn’t cash flow, it’s not affordable and it shouldn’t be that high! I ask them if they were to sell the land to their farming child, what should the price be. The vast majority will answer that question with a number less, and sometimes much less, than the current value of land in their area. For this example, we’ll say that dad suggests $4,000-$5,000 per acre indicating that it’s still probably too much. Mom adds that they bought most of it for about $500 per acre and she doesn’t know how their child will ever get the land paid for at $8,000 per acre.
So we start building a plan based on their numbers. After the plan is put together we discuss it, and they clearly like the plan and what it is going to do and how it works. It would make sense that they approve because we used their goals and their numbers.
This is when it gets interesting and the BIG question comes up. Everything has been decided using their goals and their numbers. The farming child has agreed to the plan and everyone is ready to implement the plan. So what about telling the non-farming children? Do they even tell their other children? Their answer to this question will vary anywhere from, “it’s none of their business because it’s an inheritance and they should be grateful for anything”, to the other extreme that “all the children should know” exactly what is planned and why.
When parents feel as though everyone should be informed, the next question becomes, when should they be informed? Before decisions are made? While decisions are being made? After decisions have been made and papers have been signed?
The answer to those questions is perhaps yet another question. If one of the non-farming children disagrees with your numbers and your plan, what will you do? Will you fold up the farm and quit planning?
Will you let your children negotiate their inheritance? Or will you put your foot down and say this is what we want, and this is how it is going to be? Put it this way…. Is this going to be a negotiation meeting or an information meeting? If it is a negotiation meeting, hang on, because things will likely get very interesting for everyone involved. If this is an informative meeting and mom and dad are intending to just state their wishes, that simplifies things. It is particularly valuable for both mom and dad to be on the same page and to be loving and yet firm about the way it’s going to be.
I have been in a number of family meetings where dad had already passed away but without a plan. This can be a very difficult meeting for mom. In the past, mom has usually been the “peacemaker and go-between” for the children. Now she knows what they talked about and what Dad wanted and mom desires to keep everyone happy. I was recently involved in a situation where the current land value was about $9,000 per acre and mom thought $6,000 per acre would be a good buyout price for the farming heir. She said if Dad were living it would about $4,000 per acre! As the peacemaker, she inquired what it would take to give the other children an inheritance equal to the $6,000 per acre for the farming child. We laid out a plan that we felt would make it fair to all of her children. She was very pleased with the plan as was the farming heir and her attorney.
She wanted to have a meeting to tell the family. As we went through the plan, one of the non-farming children looked right at mom and suggested that she must not love them as much and then another child suggested that mom wasn’t competent to make decisions like this and any decision she made would be contested. I was thoroughly disgusted when I heard these comments. In previous meetings, mom was passionate about how much she cared for each of her children and she was one of the most competent 70-year-olds I have ever met. Clearly some just wanted more. Were they suggesting they deserved more? Were they trying to negotiate their inheritance?
I was proud of the mom at the family meeting when she firmly stated, “Listen kids, if $6,000 per acre is not enough, I’ll just drop it back to $4,000 per acre which is the number Dad and I had always talked about. Which way do you want it?”
The thing I learned from this is how important it is for mom and dad to be firm on what they want to have happen. A very simple question is “Do you want to inform the other children of what will happen or ask them what should happen?” It is amazing to hear the ideas that arise when everyone is asked for their suggestions. Usually the most money hungry suggestions begin by stating that “this it isn’t about the money”. My question is, “if it is not about the money, then what is it about?” It should be about Dad and Mom’s intent.
For the next big family get together try this… contact all your family members and tell them to bring the ingredients for their favorite food. It could be an appetizer, salad, main course or dessert. Have your biggest crock pot or roaster ready. As people arrive just take their food and just dump everything together. Stir it up a bit and add a little heat…who wants to take the first bite? Will anyone be happy?
Moral of the story: It may be ok to invite everyone to the table, but be careful about having too many cooks in the kitchen!
