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Frugal Parents Worry About Heirs’ Spending Habits

Can their problem be solved?

By Myron Friesen

Submitted by T.S.

My wife and I are very frugal with our money. We have been ever since we met in high school. We’ve been through some tough times, but we think our conservative spending is a major reason that we have 500 acres of paid-for land. Now we are 70 and able to live very comfortably.

We have three children. Our oldest son is farming with us, but he is constantly wanting to spend money on things that don’t really make sense to us. Our middle child is not a money-spender at all and is most like us when it comes to spending. (He probably has some of the first money he ever earned.) Our third child buys everything she sees. She and her husband go on expensive vacations and give their children everything. As a result, they are constantly in financial trouble with a lot of credit card debt.

As of now, we have a plan that gives the land to our oldest son based on some discounts. Our two other children will get some cash, but we fear that someday our oldest son may even sell the land and our daughter will blow through her cash. What should we do?

The Solution:

I have heard this concern many times before over the years. I will start with this: There are times when parents’ concern and assessment over their children’s spending is very accurate. Other times, the concern is more judgmental, and when I hear the child’s version, the child suggests the parents are too conservative and never spend money for the growth or fun. So sometimes the spending of money can be subjective. I will trust your judgment, so let’s look at a couple of possible solutions. 

There are several ways you could distribute the land to your oldest son:

  1. Leave your plan as is and distribute the land to him. Do not include any restrictions.
  2. Put all the farmland into a trust for him with a number of restrictions that may have positive or negative effects on the operation in the future. 
  3. Generally leave as is but include a clawback provision for land assets he gets. This means including a provision noting if he ever sells land in the future for a gain above the discount, the gain would be split equally with his siblings. 

For the cash going to your daughter who has a spending problem, again, you could simply give it to her outright or you could also put it into a trust where she gets the income or a set distribution amount every year until the funds are exhausted. This way, you know she would have income for a period of years rather than squandering it all immediately. I have had several parents spread out income until a child reaches age 70. That may sound tough but may also end up being the best for that child.

The challenge may be with your frugal son. Do you simply let that middle child get what you intended for him to get without restriction, or is he somehow penalized because his siblings have problems? I do not necessarily agree with the idea that everyone should be penalized when some did not earn the penalty. 

Your children will either look at restrictions as a penalty or as protection. I’m cautious about suggesting ruling from the grave, but sometimes you may be doing some children a favor by doing just that

Your Transition Team Members

Myron Friesen is co-owner of Farm Financial Strategies in Osage, Iowa. During the past 17 years, he has worked exclusively with farm families across the Midwest to develop farm transition strategies. Friesen grew up on a Mountain Lake, Minnesota, farm. He owns and operates a 780-acre crop and livestock farm with his wife and four children. farmestate.com

Dr. Donald J. Jonovic is founder of Family Business Management Services in Cleveland, Ohio. He focuses on management, growth, and ownership transition issues. familybusinessmgt.com

Jolene Brown is a professional speaker, author, farmer, and family business consultant. Her tested business tools provide leadership and management solutions for the people who feed, clothe, and fuel the world. jolenebrown.com

 

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