Dealing With an Age Gap in Heirs
Submitted by Email From S.C.
We have four children. Our oldest son loves agriculture and has many talents. For over 20 years, we have had a good working relationship with him and have helped him get a good start in farming. He now owns some land and machinery and a custom manure pumping business. We also have two daughters. One is married to a farmer 200 miles away; we helped them buy a house. Our second daughter has many talents and interests, but farming is not one of them. We help her with education and travel expenses. Our youngest son is 15 years younger than our oldest son, and he, too, has many talents and is also a great asset to our farm.
The problem is our oldest son has significantly more assets already and has helped us expand what we have. But when we pass away, we want both of our sons to have equal ownership in the farm. How can we make this work?
This can be a challenge. First, let’s think about what each of your children may be thinking. Your oldest may not be excited about being an equal business partner with inexperienced little brother. Your daughter married to a farmer 200 miles away may wonder why she doesn’t get any farmland. Your second daughter may not like farming, but that does not exclude her from being part of the distribution plan. Your youngest son may wonder if he will spend his career being penalized for being younger and taking orders from his older brother. Here are a couple of key points.
1. Financial Fairness
How much financial help did you give your oldest child in acquiring assets? Did you help him with reduced land rents, reduced machinery rates, or other breaks that are all perfectly acceptable but may have added up to quite a bit?
When you start helping your youngest farming child in the same way, it is surprising how many times your oldest child forgets how much you helped him. Are you willing to talk to your oldest son and tell him your intent to help his brother is similar to the way you helped him? Keep in mind the same opportunity now will cost more now than it did 15 years ago!
2. Does Time Matter?
Are you comfortable with the shorter commitment your youngest son has made to the farm? Clearly, your oldest son has been around for 20 years, so he is there to stay. Are you comfortable knowing your youngest child will do the same?
3. Expanded Opportunities
Are there any additional agricultural enterprises or businesses your youngest child can start to have ownership in that will add to the farm? Will your oldest son see the value and opportunity to having an equal business partner?
4. Don't Forget the Daughters
You will need cash to equalize things to your daughters at your death. You can start saving now, but what happens if you die before much is saved up? Most farmers keep finding farm assets to buy during their lifetimes. Life insurance may be the best tool for infusing cash when it is needed.
5. Together or Split?
Do you plan to give individual parcels to each or keep the land together with each owning undivided half interests in everything? Either way, you may want to include rental options and options to buy if anyone wants to get out or sell.
Your problem can be solved, but it will take some communication with your children about what your intent is. Age differences can also create value differences. Ultimately, it is hoped that your children can do what they should do and appreciate your intent.
~By Myron Friesen