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Down on the Family Farm: How to Avoid Five Common Estate Planning Mistakes (Part 4 of 5)
Posted in Estate Planning

I’m a farm girl and an estate planning attorney. So naturally, I’m passionate about helping farm families efficiently transfer ownership of their land, buildings and equipment to the next generation. In this five part blog series, I’m exploring several common examples of estate-planning-gone-wrong for farmers. Read on as I address one of the most common mistakes I hear when counseling farm families in the estate planning process.

Mistake #4: “I want to treat all my kids exactly the same.”

Many times, estate planning isn’t about tax planning – it’s about family dynamics. A farmer is lucky if there is one child who wants to return home (or stay home), but it’s more likely that a farmer has at least three children. Treating the children fairly does not necessarily mean treating them equally. A typical will would leave all assets equally to the children which, without planning, would yield “tenants in common” ownership.

A series of complex questions might arise from this situation, though. Does the child who actively farms have to pay cash rent to the non-farming siblings? Would the majority of the non-farming siblings out-vote, second guess each decision made and question the yields acquired by the on-farm sibling? The one farming child may also wish to buy out the other siblings’ share of the farm, but that could easily become a huge burden on the farming child.

In no time, these scenarios would lead to a family feud. If one child is going to be managing the family farm, there are methods of planning that allow that child to have control and be provided with a reasonable salary for services rendered. After paying the child a manager’s salary, net profits can be divided equally among all children. A farmer’s estate plan should be drafted so that non-farm children cannot second guess the on-farm child’s daily decisions. Large decisions can require supermajority or even unanimous agreement, but daily decisions can be left to the one who’s in the tractor cab.

Remember to check back tomorrow to learn about another common estate planning mistake I often hear:  “I’m just going to copy what my neighbor did.”

Estate planning is important for all families and business owners, but it is crucial for farmers. If you have questions about the role estate planning plays in your family farm, please contact Bingham Greenebaum Doll LLP's Estate Planning Practice Group.

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