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He Said/She Said

Don Jonovic and Jolene Brown pull no punches on these planning predicaments.

Q: Dad and I should have a formal written partnership, but he refuses. How do I convince him to change his mind?

Jolene: It's a frustrating dilemma. Here's a fact of family business life: It doesn't matter if the next generation is ready if the senior generation isn't. First answer a few questions: Does Dad really want the legacy of the farm to continue? If yes, continue with which individuals? If yes, under what time line? If yes, how might it best happen to allow for the security of the senior generation and the purchase of the business in realistic increments and/or by gifting (outright or as compensation for each year's sweat equity)? If no action, then it may mean emotion is in the way. Dad may hate paperwork, fear loss of control, worry about fair and equal, think he won't be needed, be distrustful of son's behaviors, hate change, or be concerned about money. Or he doesn't plan to deal with it now or in the future. In most cases, a discussion with Dad, the son, and Dad's key advisers may move this in a specific direction It may not be the direction the son wishes, but at least the rules of the game will be known.

Don: What if Dad refuses? It's Dad's choice. At least the son has approached the future and his career alternatives with guts. The son should come to Dad and ask, "If we weren't related, how would you be handling this? I'm here because I'm your son. But I can't stay here in the business just because I'm your son."

Jolene: The son should have a plan B ready.

Don: The son has to be willing to pick up and leave. Maybe he needs to. It doesn't matter how much emotion is beneath the surface, heirs also need to make good business decisions.

Q: How do I ask my parents about their estate plans? They'll think I'm pushy and greedy.

Don: The parents' estate plan is none of the kids' business. Parents don't have the obligation to reveal it. It may not be necessary to know what the estate plan says, because written agreements, such as a buy/sell, are more important. Fair compensation is another form of agreement that needs to be in place, especially if off-farm siblings are involved.

Jolene: Can I disagree? It's the parents' own business unless they want the legacy to continue and the assets to be protected. The son must have his dad's assurance, not just his word. What about compensation, building equity? Wills can be changed on a whim. Documents must be the first step.

Don: Ideally, the family sits down and discusses the estate plan. But I've worked with parents who have good reasons for not sharing their estate plan. Many times, they foresee terrible consequences if the kids find out. It's possible to be fair and still not agree. Parents need to do what they think is right, then, if possible, let the kids know.

Jolene: This is where discussing it as a Business-First Family comes into play. The written documents are behind it. Role-playing may be an option. Does the younger generation have an estate plan? A will? A power of attorney? Don't ask others to do what you're not willing to do. Sometimes letting parents know the name of the adviser you worked with and the cost helps. Most importantly, let them know that you're resting easier because you've initiated the process. Share the tools and ideas you learn from conferences like Generating Success. Ask if they're willing to consider having a family meeting so you might understand their plans. Next, ask yourself if you are pushy and greedy. Or if you have been in the past. Your past actions and demeanor may affect the opportunity for an open conversation.

Don: I suggest that all parents who have not discussed their plans with their children look in the mirror and make sure the reason they haven't done it is not just because they want to maintain power and control.

Q: Dad is in a 50-50 partnership with his brother. There's a big age difference between them. My two brothers and I are closer in age to our uncle than to his three children. The oldest is in college. He isn't studying agriculture, but he says he may want to farm someday. How do we deal with my 15 years of on-the-job management but no ownership because the partnership doesn't know what to do? I'm not willing to wait much longer.

Jolene: Let's start with the good news. If the partners admit they don't know what to do, that's a good thing, because options still can be shared. If they don't want to (or will not) do anything, that's another story. The son's option for ownership may only be with his dad's 50%. So the conversation of the three brothers and their dad is to ensure the continuation of the business with 50% of the ownership. Yet, I've also worked with a family where the uncle chose to sell some of his 50% to his nephews and used that cash for inheritance for his young children. You say you aren't willing to wait around much longer. So what are you asking for? If you and your brothers are on the same page, can you work with advisers and come up with options to explore with them? If you lay down an ultimatum, you better have a plan B.

Don: There's a need here to separate ownership and pay for performance. What Dad does with his 50% is not the primary issue because the entity has its structure, and the brothers can't change it. If much younger cousins come in, the issue is compensation. If the oldest son has been in the operation for 15 years, he should be paid a lot more than a young cousin. They should be dealing with different salaries and bonus schedules. This doesn't immediately require an analysis of what to do with ownership, but that will become important. The uncle can sell some to his three nephews, and the four of them can become half owners. All of them will eventually have to decide if that kind of partnership is realistic.

Q: I do not, repeat, do not, want to live in the country on the homeplace farm. (My in-laws are moving to town.) My husband says it's our turn to move because he is the leader of the business and the farm operations are centered at that site. He says it's time to accept the responsibility, increase business efficiency, and provide for safety of property.

Don: It should have been worked out a long time ago. If she and her husband plan to make farming their career, they need to see a marriage counselor.

Jolene: Before she put the ring on her finger, they should have discussed issues like this. Once a pattern is set, it becomes a marriage problem. Is there any possibility of commuting from town and hiring someone who has the skills to monitor and provide for safety? What, if anything, would it take to make her consider moving to the place? Is there a realistic change, such as remodeling the house or relocating livestock?

Don: My conviction is that this is anything but a farm problem.

Jolene: Amen.

Q: Do I have to treat all of my grandchildren the same in my will?

Jolene: Legally, you can do whatever you want. Just remember, your grandchildren will be cousins long after you're gone. Sometimes when grandchildren live far from Grandma and Grandpa, the relationship is not there. Consider if there are any special needs of grandchildren. I hope you look in the mirror and think of the repercussions. All grandchildren will be at the reading of the will.

Don: They all will be there if they're named in the will. I've heard this question from an 85-year-old in Kansas. I told him I believed he should gift while he's alive to see the grandchildren appreciate it and not wait for the reading of the will. But think of the message you're sending. Grandchildren don't have to be treated equally, but how will those listening take it? Will your reasoning outweigh the potential hurt and damage?

Jolene: Sometimes it's the small heirlooms that cause the problems. In the transition prior to death, begin giving those to grandchildren and watch their enjoyment. Reap the benefit while living.

Q: I started working on the farm right after college and have been a key employee/manager for several years. My older brother was in real estate and recently declared bankruptcy. Mom and Dad bailed him out financially and say they want the farm to give him a salaried job because he's family. I so disagree, but Mom and Dad have not welcomed my opinion.

Don: Common sense would say no. At a fundamental level, parents want to take care of their children. It depends whether you're a Business-First Family or a Family-First Business. If they bring in the older brother, they are opening a new family can of worms. But maybe Mom and Dad can give him a stipend to go elsewhere and not wreck the business.

Jolene: Do Mom and Dad recognize you're a key employee/manager? How many years? Have they defined what skills and characteristics your brother would bring to the business? Is there a worthy job available, or will there be a change in the business plan? They might choose to help him personally, but I would suggest not doing it with the business assets. Are Mom and Dad willing to talk with a neutral adviser about it? It sounds like your parents have chosen to operate as a Family-First Business -- not a Business-First Family. Hints of the golden child are in the air. That doesn't bode well for the future success of the business. You may want to look at taking your competent skills and experience to another place of employment.

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