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Multiple Heirs Complicate Estate Planning
By Myron Friesen
SUBMITTED BY L.K., VIA EMAIL:
I read these articles about families with one farming heir and I think to myself how easy that would be! We thought we would have four children. We ended up having triplets on our last pregnancy. We have worked hard to acquire over 2,000 acres of prime farmland. We also raise cattle, contract-feed hogs, and do some custom work. Our kids generally get along, but we know they have different interests on the farm. They all have families at different stages, and a couple of them want to grow and have a big vision for the future. Others are less driven to grow the operation because they also have interests off the farm and have younger families.
Our farm is profitable, and some days I think it would be great to keep it all together, especially when I read articles about something like an LLC. There are days when I truly fear what this could look like a few generations from now when there are more assets and more people. Can our problem be solved?
I think a better question might be whether a problem can be avoided. To people on the outside, your farm and family probably look glorious. They see a bunch of assets and people available to help. However, more than likely, all six of your children are probably thinking about some of the same things you’re concerned with.
You could arrange a couple of figurative boxes, one for land, one for livestock, one for the operation. On the tags, write “From Mom and Dad,” and then figure out who to address each box to. It’s easy to say the farming heirs need to keep the operational assets, and then all land assets can go to anyone with guidelines. It gets interesting when some want to improve or leverage those assets, while others do not have that same goal. Do those who want to grow end up growing the entity for everyone? Or do they peel off and start growing on their own? Who will want or need cash? How do your children plan for their families?
Here are some options.
- Leave as one big unit. With different goals and family situations, your exit strategy and management rules will require more time than your entry strategy.
- Develop entities and leaders for each area of your farm. This has good potential with time spent on guidelines for each entity and how each entity would interact with the others. There could be some independence while generally staying together.
- Keep the operation together (possibly with an entity) but split up the land among all children with buyout and rent options. Wait, that’s contrary to what most people would say and even what I think sometimes. However, the efficiency is in combining the use of labor and machinery. If people maintain individual ownership of their land, they can make a choice of being more efficient and staying with the group, or possibly going off on their own.
Sometimes I don’t like all the options I write down, but it helps me discover what does not sound good and, hopefully, that eventually points me in the right direction.
Regardless of the option you choose, I think it’s important that the plan allows everyone to feel valued and everyone has incentive to work. Drawing out a picture with an overall vision will help. Just make sure that if you have any non-negotiable priorities, you make them clear to your children before opening it up for discussion.
Your Transition Team Members
- Myron Friesen is co-owner of Farm Financial Strategies in Osage, Iowa. During the past 18 years, he has worked exclusively with farm families across the Midwest to develop farm transition strategies. Myron 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