Content ID

327491

Farmer asks if giving assets to a son-in-law will cause problems

Problem: Will giving assets to my daughter’s husband cause a problem?

We have three daughters (ages 42, 46, and 49), and all of them helped on the farm, were in FFA, earned college degrees, and now have great jobs. They all have very stable marriages and respectful children. Our middle daughter is married to a great farm kid. He has been a key guy on our farm the past 20 years. I want to make sure he is taken care of. We also have another key employee who is 55 and has been with us for over 25 years. I want to make sure he’s taken care of as well. We own 800 acres and farm about 4,000 acres. How do we keep the farm going, take care of our key people, and take care of our daughters without creating chaos? - Submitted by email from K.B.

Solution:

Let me start with this, K.B.: You may feel like you have a problem, but if you have three awesome daughters with healthy marriages, a good son-in-law working with you, a longtime employee, and 800 owned acres, I’d call that a win! Now, I do understand what you’re saying. You want to keep a good thing going.

A little of my hesitation in solving your problem is because of the mystical words, “take care of.” What does that mean exactly? Does that mean paying them well or bonuses for working? Does that mean they get assets or discounted purchase options on farm assets like a family member?

Let’s start with the key unrelated employee. Taking care of him probably means paying him well enough so he recognizes your appreciation. Retirement plans or bonuses often work well. Seldom do key employees get rewarded with farm assets when you have qualified heirs of your own.

Now to your son-in-law. Over the years, I’ve been cautious about suggesting major distributions to the in-laws in fear they someday become out-laws who disrupt the farm. Usually, the distribution to an in-law occurs through the spouse. However, every situation merits its own consideration. I could see an agreement with your son-in-law on the machinery, buildings, and bins. What about the land? At the very least, the home farm should go to your daughter and son-in-law. That typically would go directly to your daughter. Then she could decide if it should be split with her husband. Additional provisions could protect the farming opportunity for your son-in-law’s lifetime.

What about all three daughters? My first bias is to keep farming assets with farming heirs, especially if they have likely farm heirs. However, you could hold the balance of land in a simple entity such as an LLC. The LLC could give your son-in-law the option to rent the land and buy the others out if they want to sell — provided he remains married to your daughter.

Here is a question: Is the deal over if your son-in-law divorces your daughter? It sounds like a simple answer. Ironically, I’ve had some parents appreciate their in-law so much that when they say, “take care of them,” they mean even if they divorce their child. Sometimes they know the “Whose fault is it?” road goes both ways, and that their own child may be the problem.

The final step may be to explain all of this in a family meeting. If you’ve read my past articles, you’ll know that I don’t always recommend family meetings. However, this might be a case where everyone in your family, including spouses, could benefit from hearing your intentions. Family meetings sometimes fail because they focus on the wrong things. For you, a family meeting should focus on appreciation, not entitlement.

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