Dear Michael: We haven’t done anything with our wills since the kids were young. We have two children – one farming with us and one who farms next door as she married the neighbor farming child. Our son just got married but our married daughter has three children and been married for over ten years now. We would like to make sure the son has the farmland and equipment and then save up enough money for our daughter to offset what he is getting. We’ve done a good job keeping our farm debt free so it shouldn’t be a problem for our son. What do you see in a situation like this? Haven’t Updated.
Dear Haven’t Updated: Well, the number one problem is that you have an outdated will and if you died today your children would split the property leaving your son in partnership with your daughter.
But, I imagine the reason you haven’t updated is because you really don’t know what to do or what issues you need to face in your estate plan. A lot of people talk about needing to do something, but when they sit down for a chat about it, they don’t come up with the right questions or the right answers so they shelve it for another day, another year, another decade, and so on.
In any case, if you want your son to get the farm, you have to realize being newly married (and likely without any pre-nuptial agreement) that any property going to him could end up in your new daughter in-law’s hands either by the death of your son or by a divorce in the future.
You’ll likely want to design your estate plan so that if either of these two events occurs, the farmland and farm operation would be protected. You can do this by putting a clause in your will or plan that your son must farm until he is a certain age and if he doesn’t, for any reason, then the farmland reverts back to your farming daughter who is a little more established.
We have to remember, we’ve had a decade of good prices and good crops and you were smart and paid off your debt with this extra income. However, going forward, when projections show you could do everything right the next few years and still lose money, then you better consider all the possibilities.
The number one reason for divorce is money – or the lack thereof. You could make a lot of money, but if your family is used to spending more than what you can make, then expect problems.
In fact, money problems are going to be a part of our future. We have a few issues this is going to bring up. Farm debts that haven’t been a part of farming for over a decade will reoccur. A new generation that had it pretty easy will now have to see the other side of the coin when an industry has it’s issues.
All business go through cyclic changes. One day Apple is laying off 120,000 workers and the next year they are experiencing growth. Car manufacturers have years where they can’t keep inventory, the next year they are shutting down factories. This doesn’t just happen in farming, folks.
The interesting thing is when money is easy and farming isn’t difficult, people forget to plan. My business has been slow for the past decade because people didn’t have money problems. Now that the new projections are coming in, and people are starting to realize planting without planning could end up in disaster, business has gotten significantly better.
Money makes the world go around. With it all problems are manageable. Without it, all problems become magnified, especially if you’ve had no experience in dealing with debts or shortfalls in income.
As time goes on, more and more families are going to have to deal with these issues head-on and they’ll need the help of an experienced estate planner.
“Keeping the Family Farm in the Family”
Great Plains Diversified Services, Inc.
1424 W. Century Ave., Suite 208
Bismarck, ND 58503-0917
Toll Free: 1-800-373-4078