We read with some interest about your booklet your developing to help families determine how much of the farm should go to the farming child – their sweat equity in the operation – and what goes, then, to the other children.
We don’t have a current will. In fact, we don’t have a will at all. Will this booklet help us to understand our current situation and where we need to be in the future? How hard it is to fill out? – Back in School?
Dear Back in School? – Let’s just say, for the time being, this booklet will be a patient process. You’ll need to remember what you had before your farm heir started and what you’ve added since that time when s/he participated in the growth of the farm.
We then get into three different equations in the booklet. The first part of the booklet gets into situations – such as yours – where either you have no will or you have an outdated will from when the kids were young. You probably have the old standby ‘everything goes to my spouse and if they pre-decease me, then shared equally between all of my children’.
You use this section to fill in what happens when you die with this type of will – or no will. The farm assets will be divided equally between all of the children and the non-farm assets – such as savings, life insurance, and non-farm real estate – will also be divided equally between all of the children.
The question then asks ‘If your farm heir only receives this amount in farm assets and has to use his or her share of the non-farm assets to buy back the non-farming children’s share of the farm assets from the non-farm assets, what are his or her chances of making it?’ Many people, when they see these numbers, realize it’s impossible for the farming heir to make a go of it.
Oftentimes, I will then see a swing to other side and my clients will say ‘What happens if I give all of the farm assets to our farming child and the non-farming assets to our non-farming children divided equally between them?’
We then have a section to fill out where you can do just that. You put all of the farm assets into the farming child’s name and divide the non-farm assets between the other children.
For some people, they have sufficient non-farm assets to provide for the non-farming children. In other cases, due to the high inflation of farmland and other assets in farming in the past decade, the amount the farming child receives dwarfs the amount the non-farming children receive. Oftentimes, the non-farming children are getting less than five percent of the entire estate while the farm child receives eighty, eighty-five, ninety percent or more of your entire family estate. Most couples would look at this and say ‘That’s not fair to the other children!’
As usual, the answer always lies somewhere in between these two extremes – the farm child getting all of the farm assets or sharing equally with his or her siblings. Now we have the two extremes in black and white – extremes eighty percent of farm families already have in their wills.
In the first section of the booklet, we have some formulas to use such as how many years has your farm child worked with you and does s/he deserve a portion of the total value today, or a portion of the value added since s/he started, or various formulas you’d like to use. You’ll come up with a number as to what you feel the farming heir rightfully earned from his or her participation in the farming operation over the years.
We then have a third box – and this one accounts for the share earned by the farming heir. It takes the total amount of assets – puts the farm assets earned by the farm heir into his or her column – and then you can divide the remaining farm and non-farm assets equally. Some people might find the farm heir needs to prepare to buy out the percentage his siblings receive. You can then play with the formulas to determine the right balance.
The next section is the solution section – whether your farm child uses a contract for deed, outright purchase, rents, etc. We’ll get into that the next article.
The good news is this booklet is almost ready for mail use. The really good news is that it will soon be on our website where you can just log in, put in your farm and non-farm asset values, and it will fill out the rest automatically. The bad news is this on-line version is about two weeks away yet from the time of this article. It should be ready right around Halloween – we hope.
For those of you who like to fill stuff out on the computer and have the computer do the work for you, send us your email at email@example.com and we’ll let you know when we have this functioning. For those who prefer to fill things out by hand and do your own math, either email us at this same address or call and we’ll mail one out to you.
“Keeping the Family Farm in the Family”
Great Plains Diversified Services
1424 West Century Ave., Suite #208
Bismarck, ND 58503
Toll Free: 1-800-373-4078