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If Cash Is King, Why Are Some Heirs Not Happy Receiving an Inheritance in Cash?

Can their problem be solved?

The Problem (submitted by R.T.)

All of my life, my dad used to remind me that cash is king. That has served our family well knowing that we could be prepared to “buy a good deal” whenever one came up. We have done that multiple times to build our farm into what it is today. Now we have our estate plan done, and some of our children who aren’t farming say they don’t want the cash – they want land. Our children are all in different financial positions, but some of them have very few other assets, so we thought cash would be great for them. Also, we don’t want the farm divided. I have seen many neighbors end up with farm sales when multiple family members owned land together. Therefore, we concluded that cash was a good thing for those not in the farming operation. Did we miss something? Or is cash not king anymore? How do we solve our problem?

The Solution

The good news is, you have a plan in place and you listened to your dad. The principle of cash being king served your family well. I believe your dad was telling the truth all the times he reminded you of the importance of cash, and there’s still a lot of value to cash. 

In this situation, one of the challenges with farm estate distributions is determining whether the problem is yours or your children’s. I believe it’s possible that it’s more their problem than it is your problem depending on how you determined equalization values. Assuming the values are reasonable, I would also suggest that those children who are complaining about getting cash actually like cash; in fact, maybe they even love cash! So it’s not that they don’t want the cash, they may just want more of it. One way they may view getting more of it would be to inherit the land first and then sell it to get more cash. 

Usually with farm estate distributions, if everyone does get land, there is typically some sort of restriction to it, such as an option for other family members or the farming heir to buy it at a discount or to rent it. If renting the land with today’s numbers, heirs might get a 3% return on their asset that is all tied up in land. By you giving them cash, it allows them the freedom to do what they want to do. From the sound of things, when some heirs have very few other assets, cash can be a nice boost to them or allow them the freedom to do as they choose compared with owning land, which would be more restrictive. If it’s not restrictive, it means they sold it. 

The one downside to setting an amount of cash now is that with inflation, a set amount of cash will buy less in the future. Usually when that comes up, heirs suggest that land is going to be worth a lot more in the future, so setting a price now is not “right.” 

My reaction to that comment? If they’re certain that land will always go up, then they should be buying all they can haul right now. If their reaction is that land is way too expensive now and they don’t have any cash to make that kind of down payment, they just proved your dad right: Cash is king. Assuming they are getting somewhat of a fair and explainable amount of cash, maybe you have already solved your problem. They just need to solve their problems. 

Myron Friesen is co-owner of Farm Financial Strategies in Osage, Iowa. During the past 19 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 910-acre crop and livestock farm with his wife and four children. farmestate.com

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