How about some tax relief?  I mean relief from tax talk.  So many articles, both print and internet, are focused on taxes:  Federal estate taxes, Illinois estate taxes, gift taxes and capital gain taxes.  How about an article with no taxes? Farmers face estate planning challenges that have little or nothing to do with taxes.

Rewarding farming heirs

Most of the kids moved away from the farm, while one or two stayed around.  Now, as the parents are aging, the farming child (let’s say son to illustrate) depends totally on the farm for his living.  As the parents grapple with their plan to transfer their estate, what is fair?  There are two sides to this coin.

The farming son contributed his blood, sweat and tears to helping make the farm successful.  He stayed around, never fully compensated for all of the time and effort put into the operation.  When commodity prices were low, so was his pay.  When prices went up…well, Dad said they should save the cushion for a rainy day!

The other kids usually chose their path.  They didn’t particularly care for the farming life, wanted something more exciting or, given the hard-scrabble they may have felt growing up, wanted a “better life.”  The parents helped pay for their college, blessed their marriages and, even today, appreciate their off-farm success.  Maybe the farming son should receive most of the farm.

Silver platter theory

Consider the other side of the coin.  The non-farming heirs might say, “My brother never took any real risk.  He was protected and supported.  He had opportunity and a complete living handed to him on a silver platter.”

Ouch!  In some cases this might be true.  I heard of a father who told one son, “Act stupid and you won’t have to work as hard.”  If that is the case, maybe the other kids are right!  Maybe everything is being spoon-fed to one, and he is not doing anything to really earn it. 

Now the farm itself has become a gold mine.  Land prices—and cash rent rates—went through the roof.  What used to be a $500,000 estate has ballooned to $3 million or more.  The kids who left the farm know it, too.  While making a living from the farm used to be more about the work you did, now mere ownership of land seems like a gravy-train.

Equal and fair

I’m just an attorney who grew up on a farm.  I’m no psychologist or private investigator.  Sometimes parents overly-shelter a “chosen-one” and treat the other kids unfairly.  But I believe after hearing many of these stories from multiple generations, more often than not the first perspective is closer to reality.  The silver platter version usually reflects wishful thinking, perhaps even sour grapes. 

Fortunately for me, you have to make the decision, not I.  But if your reality matches the first description, it is not fair to leave the farming son merely an equal fraction of your estate. 

Don’t misunderstand.  I don’t mean that if 90% of your estate is the farm you must leave it to the farming son while the other four kids split 10%.  All of the heirs should probably be blessed by the appreciation of your estate.  The tough question you keep putting off, though, is, “How?” 

I find that it helps to think in terms of “owner” and “operator” (or simply landlord and tenant).  If you own the land and your son makes his living farming it, your compensation is as owner.  Your income potential as owner could be shared among the children while still protecting the son who is the operator. 

Consider giving the farming son ownership of more than an equal share of the land, plus a right to rent the rest of the land.  For how long, and at what rate of rent?  You can set or limit those.  If one child wants to sell out their ownership share, you could prohibit it, or you could say they must sell at a specified discount to the other kids. 

“Can you put those limits on your heirs?” Sure.  Trusts are a flexible tool for setting terms and stipulations of this type.  But be careful and work with competent counsel.  I recently read a deceased person’s poorly drafted trust that was intended to keep the farm with the farming son.  But it actually required the farming son to “conclude actively farming” in order to get the farm.  That was not intended!

Take responsibility

However you plan to divide your estate, treat your family like adults and tell them.  Now.  Invite their comment.  If you don’t have the nerve to tell them, then either you raised unreasonable children or your division is not reasonable!  Keeping your decisions secret until they “read the will” only assures that your plan will cause strife for decades after you’re gone.