ROSMANN: Farm estate planning lessons learned "the hard way"
Six months ago, a man in his late 20s, "Joe," who farms with his father, "Bill," asked for advice. They maintain an 850-acre corn/soybean farming operation and produce about 3,500 pigs annually in their 1980s-constructed farrow-to-finish faciliti...
Six months ago, a man in his late 20s, "Joe," who farms with his father, "Bill," asked for advice.
They maintain an 850-acre corn/soybean farming operation and produce about 3,500 pigs annually in their 1980s-constructed farrow-to-finish facilities and about 50 calves in their cow/calf herd.
While I changed their names and several identifying circumstances, the substance of the issues that Joe revealed are portrayed accurately. Bill's mother was already deceased when his father passed away eight months ago.
When his parents' will was disclosed, Bill learned that he had inherited only 40 of his parents' 360-acre farm. His inheritance includes the 60-year-old farm house in which Joe grew up, the swine facilities, four grain bins with 60,000 bushel capacity, two barns and two machine sheds. Bill and Joe also rent the additional land they farm.
Bill's younger brother, a farmer as well, inherited the remaining 320 acres of cropland Bill has rented from his parents for 35 years, and Joe has helped farm for 10 years. Bill's only other sibling, a younger sister, inherited a life insurance policy, their father's auto, a town house, and its contents.
Bill's brother owns a 5-acre farmstead on which he and his family live, consisting of a house, three sheds and a 20,000 bushel grain bin. He rents 600 acres of land on which he raises corn, soybeans and a dozen beef cows and calves.
Bill felt deeply hurt that the care he had given to his parents by taking them to medical and other appointments, the good maintenance he had given to the family farmland and buildings and timely payments of farm rent for many years were dismissed as unimportant.
Joe indicated his father felt he was being chastised by his parents for reasons he didn't understand; he was depressed but wouldn't talk about it, Joe said.
Joe felt his father had a right to be dismayed. He said his grandparents treated Bill unfairly in the will. Joe said he hoped that he might someday also inherit the family farm.
There are alternative ways of looking at things. The feelings of the inheritors aren't settled and other factors need to be taken into account.
When Joe and I talked, it seemed that Bill's deceased parents likely felt they gave their oldest son many years to establish his farming operation on their land.
Joe's parents accumulated substantial income from the family farm that they kept in savings accounts because Bill's parents did not want to undertake extensive updates of the livestock facilities and other buildings. They felt these matters could be decided by the generation that succeeded them.
Bill and his wife prospered and acquired extensive machinery, livestock and utilized a good home for their children. Bill's parents likely saw in him considerable capacity they helped him develop in order to carry on after their passing without as much monetary inheritance as his siblings when the estate was probated.
Estate planning and discussion with the family would have helped their son understand his parents' reasoning, and it would have enabled Bill and Joe to consider alternative plans for their farming operation.
Bill's parents could have thanked Bill and his family for years of dedicated care of them, their family home and land.
Bill's brother and sister likewise would have benefitted from knowing what they would eventually inherit from their parents' estate.
Bill's parents planned what they thought was fairest. Like many in their generation, they didn't know how to communicate their thinking clearly, and they hoped their descendants would be happy and get along. A letter of instruction to everyone involved in the will or a family discussion of their final wishes would have helped everyone.
Bill's brother and Bill can still confer and discuss farming arrangement options. Trading farmsteads could benefit both brothers, along with compensation for the greater worth of Bill's farmstead.
Perhaps Bill can purchase additional property that might serve as a better farming opportunity. Bill and Joe should consider "what ifs" between themselves and with Bill's brother also.
Joe, as yet unmarried, and Bill have many assets that can serve them well if they create a new beginning. They may be able to purchase farm land at a lower price than a few years ago.
After all, Bill and his wife will have money from the sale of 40 acres and the farmstead to his brother, along with their considerable savings, to purchase farmland of their choice. There are tax advantages for everyone as well.
Bill could look at the estate distribution as an opportunity to move ahead and to be gracious to his younger brother and sister. Setting an unresentful tone could be a positive move for everyone.
If his uncle doesn't have any children who wish to farm, Joe could still eventually have "first dibs" on the original homestead if everyone gets along.
Mike Rosmann is a Harlan, Iowa, psychologist and farmer. To contact Rosmann go online to: www.agbehavioralhealth.com .