Is farmland a business asset or a family legacy?
My September 2008 column hit a nerve with some readers. Here are two points of view and my response.
I could not believe your solution to the two farm sons' inheritance.
Rich [the on-farm heir] spent decades sacrificing, working, and building up the farm as a business.
All his brother, Dan, contributed was his "dream of farming," while he pursued an engineering career and contributed nothing in all those years to the business.
Just because Dan had a dream, you say he should get something of the business. NO! If the parents want to set up a trust to pass on to Dan, that would give him what he is really seeking: the money from the farm assets.
If Dan had really been that interested in all those past years, why didn't he invest any of his hard-earned money into the farm? He waited until the folks were elderly to try to cash in on his dream.
Your solution would not solve anything. Why should Rich give up half of the assets he's worked to build, or lose the farm to pay off his brother? Dan's excuse that the farm couldn't support them both was as lame as it gets. He didn't want to take the responsibility or risk and stick it out.
Why do people think that, at death, all the kids have to share equally? They didn't live equally or take care of their folks equally.
The farmland acquired though years of hard work and good management should not be divided. Land is the source of wealth.
Therefore, Dan and Rich need to look to the future -- beyond each other.
Together, they should prolong the family farm future, each utilizing his career to help preserve the land. It belongs to the future. Put the land in a trust as a concrete cornerstone.
Rich should farm his 50% at no cost, and since he is the farmer, farm Dan's share at a fair rent with no fear of loss of this acreage.
Keep the brothers side by side to continue to build land base together, each playing their roles and neither taking from the family's future.
In my September column, I suggested that the parents look at the land base more as an opportunity for their sons than as an asset to be divided. In that, I agree with B.D.
M.S. is correct that Rich built the business without Dan's help, and in fairness, he should benefit from that business (including improvements he may have made to the land). But to do that, he only needs access to the land. The key question is does he need or have a fundamental right to ownership of that land?
Owning land is not the same thing as owning a tractor or a grain bin. The useful life of those business assets are measured in years. The useful life of land, however, is measured in generations.
It's true in transition planning that you don't owe your children anything. It's the parents' right to distribute assets (including land) as they choose.
Even so, if they see land as a major asset for this and future generations, they will best preserve that legacy by keeping it intact as a source of wealth for all their children and for future generations.