Time to tie up loose ends

Dear Michael: We have been farming for quite a few years now and just five years ago, our son came back to our family farm. Of course, these past five years have been pretty profitable and we bought some land for him to get him going. He did okay the first four years, but last year had a tough time making the payment and we had to pay his income expenses for him? We are relatively young (late fifties and in good health) but we don’t know what to do for sure in our will and our estate planning? Any suggestions? – Just Got Going.

Dear Just Got Going: Your question reminds me that estate planning isn’t just writing down something in a will and hoping it stands the test of time. Agriculture has always been a volatile business and any time you have volatility, you need to make certain your day to day estate plan, year to year estate plan and long-term estate plan are all in sync – especially when things get tough.

First of all, we have to be realistic about what is happening in today’s economy. As long as crops are plentiful and beef supplies are long, the chance of prices rising in the next few years are slim. China has decided to pull back on their imports of all kinds as they take a break from a ten-year record growth rate. The drought that struck the Midwest for the past eight years has broken and crops are plentiful across the country.

With all this in mind, if you have a son who isn’t able to make payments on land he purchased (which you co-signed for) you’re going to have to take a close look at incomes and expenses in the next three years based on today’s prices. If you can’t raise your income substantially to cover expenses, then you’ll have to look at cutting expenses.

People who bought new machinery are still stuck with the machinery payments and there’s nothing to be done there other than use it until times turn. However, if you bought overpriced land, you might have to consider selling the land you purchased in order to make ends meet. You need to have a heart-to-heart with your son about the ways of life and determine if this is your best course of action.

Paying for overpriced land during a downturn is like having a touch of gangrene. You can ignore it and hope that it goes away, but if you do, it can and will spread throughout your entire body of the farm. If you’re in tune with the banker and the banker sees enough equity in your farm operation (and income) then maybe you can take longer to react.

However, if you’ve had a couple tough years and now have to borrow against your equity (in addition to the high priced land payments) then maybe it’s time to think about cutting of the finger or toe before it infects the entire body.

You might also find with your son that he enjoyed farming when prices were good and he was riding high, but a true farmer loves the land and will love the land through good times and bad, sickness and health until death do you part.

If you feel like he’s not that in love with farming and the land, then perhaps it’s time to think about another career for him, and how that affects your overall farm operation.

Too many people wait too long to ‘have the talk’ about farming and its realities, and too often the entire farm go pear shaped by the time both generations finally face the reality of their situation. Be proactive – discuss pros and cons – look at every possibility and steel yourself to make the right decisions in the times to come.

Make sure your wills and other estate plans also reflect these possibilities as you come to terms with everything. Some of you never changed your wills when your child came back to farming or don’t have a will at all. That means your farm operation rests on a heartbeat from going down the drain. If there ever was a time to tie up loose ends, speak honestly and face reality, this would be it.

“Keeping the Family Farm in the Family”

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