The Farmland Dilemma: Help! The Siblings Who Don’t Farm are Getting Farmland!


I could hear her frustration and feel the pain as I read the lengthy email describing an all too common scenario for farm families today. The aging parents have been pressured to be “fair” to the siblings who don’t farm who have noticed that farmland values have increased significantly. They would like to have a piece of that valuable farmland as part of their inheritance. Unfortunately, the older folks have not planned well financially to creatively take care of gifts to the non-farm heirs. They neglected many warnings from lenders and financial planners to build up what tax and estate specialist Merle Good calls “a personal wealth bubble.” The farming child wants to keep the farmland intact and needs a decent base for a critical mass to create revenue. He or she may want to own all the land ideally, yet in reality, ownership may have to be shared with siblings.

Do You, as the Farmer, Want to do Farm Business with Your Siblings?
If the answer is no, then there are some courageous conversations needed immediately.

The parents are well into their eighties and scared that a family fight is brewing. They have avoided conflict at all costs when they should be embracing a solution for conflict resolution.

Pouring money into stocks, other real estates, and mutual funds did not appeal to them when they were more worried about how to meet the operating line payments and the mortgage payments during the tough years of the eighties and nineties. Now they are trying to piece together an estate plan with accountants who want them to be tax efficient and use up their capital gains exemptions, and with lawyers who are good at writing agreements. The player missing on this estate planning team is the referee. That would be the mediator, or farm family coach, who is willing to dive into the tough issues of asking each family member this key question:

What Does Fairness Look Like to You Considering that One Sibling Needs Access to All the Farm Land to Keep the Farm Legacy Viable?
Merle Good would encourage long-term rental agreements for the farmer to access rented land from non-farm siblings who hold the title. The sibling may choose to never sell their gifted land to the farming sibling, or may ask for the Fair market value, rather that FFP (Fair Family Price). I do not see this happening too often in 2016. If quarter sections are selling for over $400,000 per quarter, it may never pencil out for the next generation who has a passion to farm. In 2009, we chose to gift a $100,000 quarter to our son so that he could leverage that equity to buy another quarter. We had planned to gift it to him in the future, but his need for equity trumped our estate plan, and it has worked out well. Six years later, our son’s second quarter has doubled in value; that is why there are fights over land.

How Can You Solve This Expensive Farm Land Dilemma?
1. Recognize That a Transparent Conversation With All Your Heirs is Long Overdue
Consider asking each adult child what they expect from your estate, and what fairness looks like to them. You might be shocked at the answers. I have heard from emotionally intelligent adults who simply say, “Mom and Dad deserve to live well now and enjoy the fruit of their labor. I am economically secure; the land needs to stay with the farming partners. Any gift that I receive will be a bonus. I am not expecting to inherit any land.” (Yes, I can hear you silently saying, “I wish that kid was mine!”)

2. Be Prepared to Discuss FFP Land Rental Agreements
Alternatively, the non-farm heir may expect to have their name on the title of land but is very prepared to have an FFP land rental agreement for 15 years or more with the farming sibling. This person puts a high value on the legacy of lasting respectful family relationships and expects to be welcomed back to the farm for gatherings with no tension over the farm’s land deals. Options may be given for the future purchase of that land by the farmer, but not necessarily expected.

3. Call a Facilitated Family Meeting
Call a facilitated family meeting with your trusted advisors as the leaders of the meeting. Farm family coaches may team at that meeting with the lawyer and accountant so that everyone hears the implications of each scenario presented at the meeting. Professional advisors have seen creative solutions and know what a good fit looks like for your farm family. Use this meeting as a discovery process, and don’t get locked into one way of creating solutions.

Be sure that spouses and “almost married” partners are at the meeting so that nothing gets lost in translation. Everyone will understand your intent, your fears, and your vision for a legacy for the family and the farm. Accept the fact that feelings will create tears, so have a tissue box ready, and be willing to sit through deep emotions.

4. Don’t Sell Yourself Short
Be clear with the aid of your financial planner that your income stream is secure until you are 102. Most farming successors will ensure that the parents are financially taken care of, regardless of how tight the margins on the farm may be.

Non-farm heirs can also contribute to caring for parents, and give gifts of time or resources. If the family can freely talk about what each family unit needs for family living and debt servicing, you might be surprised at how well siblings are actually doing. I am saddened by a grumpy father-in-law who assumes his daughter-in-law is not pulling her weight with income generation, yet she is the real support for the family’s living needs with a six-figure income!

5. It is Not the Responsibility of Parents to Make Sure That All of Their Children are Economically Equal
I know young entrepreneurs who are fiercely driven to make financial gains on their own without heaps of financial gifts from their parents. There is some self-respect for those who chose to make their own way and not rely on parental financial assistance. It is 2016, and some adult children are already wealthier than their parents according to their net worth statements. Money does not equal love. Perhaps the best gift you can give your adult children and grandchildren is more access to you and your time.

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