Examining some 'would you rather' questions about farm succession planning
Life is full of "would you rather" questions that we're answering all the time. Myron Friesen lays out some about how you'd like to plan your farm estate.
I’ve never really been into these types of "would you rather" questions, but from time to time I remember them coming up in our family when kids would come home with some questions from school. I remember them even being on cards to ask while driving on a trip in a vehicle. Often I recall them being kind of odd questions like, would you rather eat a squishy bug or have a snake crawl across your legs? Or would you rather eat moldy cheese or eat uncooked chicken? It was almost always a kind of a comparison of two undesirable things, and I guess the answers revealed your preferences.
So maybe there is a farm version of “would you rather” Lets give it a try.
- Do you understand the whys behind what happens on the farm?
- Easy to see, harder to do
- The 'sleeper hold' for farms may be not taking into account interest rates in estate plans
- There are some things you can't unhear in a farm's story
- What you say, what you mean and what someone hears may all be different
- Would you rather come back to the farm and always reinvest nearly all of the farm profits back into the farm and always feel cash poor, or would you rather leave the farm and be able to spend all of your income on other fun things and vacations?
- Would you rather get land worth $15,000 per acre and receive a $300 net rent check after property tax which amounts to a 2% return, or would you rather get a lump sum check and invest it into a stock market portfolio that has average a 7% return like other assets in your portfolio?
- Would you rather get a income stream from land for life with strings attached such as who you would have to rent your land to and that you could not sell it, or would you rather receive a smaller lump sum of cash immediately at a parents death with no strings attached?
- Would you rather receive 160 acres that generated a $48,000 annual income and was worth $2.4 million but your only sale option was to get $1.5 million from a farming sibling, or would you rather receive $1.5 million instantly and invest it and get a 5% return or a $75,000 annual income.
- Would you rather pass on a lump sum of cash to your own children, or an undivided interest in a land entity where eventually each of your grandchildren would be a 1/12 owners with their other 11 siblings and cousins?
- Would you rather have a plan for distribution of your farm to your wife and kids, or would you rather let your wife and her next husband decide?
- Would you rather have full control of your inheritance, or would you rather have your decision depend on the decisions of other siblings and in laws?
- Would you rather have more cash flow today and only own a fraction of the farm, or would you rather have tighter cash flow today and own it all later?
Come to think of it, in a way life is full of a lot of "would you rather" type questions, and in general we are picking one thing or another all the time.
So maybe there is one more “would you rather”: Would you rather decide how your farm will be distributed and how much each person will get, or would you rather let the kids and their spouses fight it out in court?
I know how I would rather do things for my farm. For many, there are times where it may not be necessary to ask the beneficiaries a “would you rather” question, but instead you are asking that question of yourself and that helps formulate your plan.
Also, in case you’re wondering, I would rather eat a bug rather than have a snake crawl across my leg.
Myron Friesen is the co-owner of Farm Financial Strategies Inc. in Osage, Iowa. He can be contacted at 866-524-3636 or email@example.com.