What is Fair DNA Pay? - Elaine Froese | Canada’s Farm Whisperer | Your go-to expert for farm families who want better communication and conflict resolution to secure a successful farm transition

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What is Fair DNA Pay?

by | Feb 15, 2011 | Uncategorized

What is Fair DNA Pay?

Retiring farm couples should leave most of their farm assets to the farming son or daughter.

A farmer and I were sitting at the farmhouse table having a heated discussion about his frustrations with his siblings. His brothers and sisters are uncomfortable with family plans for the farm assets. Sound familiar? This story is played over in thousands of farms across the bald prairie this winter as parents releasing management of the farm strive to treat all children “fair.” What makes the decision agonizing is that “fair” may not — and probably should not — mean “equal.” The farmer said, “Elaine, it’s like DNA pay. For being born in a family, everyone deserves to get something, but what about my decades of contribution to building the business?”

Keep that thought…two sides of the ledger…DNA pay and contribute to wealth.

Now before you grab the phone to call me and tell me that I was talking about you, I am talking about you, and many other farming adult children in the same boat! David Kohl from Virginia Tech threw out a number ratio at the International Farm Succession Conference in August that will disturb you. He said that farm heirs should expect to get three times as much dollar value in assets compared to the Non-farm heir. So if my client gets three times more value than his sibling, that is not unreasonable according to Kohl. Jolene Brown from Iowa tells her farm parent audiences that all they owe their kids is love!

Transition specialist Dave Goeller from the University of Nebraska at Lincoln said at the same conference, “There is nothing more unfair than treating the un-equals equally. In business, the heir contributes to the wealth to protect the wealth. If there is even distribution of wealth, there is no consideration of contribution!”

That’s exactly as my farmer friend sees it.

The DNA pay is gifts, shares, and assets allocated to children just because they are part of a family. On the other side…the contribution factor of the farming heir…has to be considered in the succession planning equation when share percentages, gifts, and plans are being made.

“I just expect Mom and Dad to live well for the next 20 years and enjoy the money they have worked so hard for!” Yes, most respectful, and honoring adult children want their parents to take care of themselves first financially. Parents are living longer, and successful transition plans factor in their lifestyle needs for the next two decades. You have to plan to die, which is your estate plan, but the plan to live in the lifestyle and succession plan. Ultimately, what you do as parents with your assets is your call. But it really pains the heir to think that the farm business will be chopped up into four equal pieces to satisfy your deep feelings that “fair has to be equal.”

How did your dad and mom treat you? One of my accountant friends laughs that there are no money fights in his family because there was no money! If you were given the farm and expect to roll it over to your farming child, have you made other investments to gift to your other children? Who said you had to give your children any financial help?

This is where I stand on my soapbox and say, “GET YE A FINANCIAL PLANNER!” At 62, you can still do some future financial planning, but if you are 42 and reading this, please set out some lifestyle financial plans now, beyond what plans you have for investing money back into your farm business. The more non-farm income streams available for DNA pay (if any) the better flexibility and freedom you will have to deal with being “fair to the kids.”

My next book might be called “The Curse of the coddled child” because we have raised kids with many opportunities, and somehow that has translated into a keen sense of entitlement. That said, I know many farming sons who are thrilled that they were good for the money to acquire a loan to buy out mom and dad’s farm assets or the cattle herd. They have the pride of ownership and knowing that they worked hard to pay off a debt that creates an income stream for their parents’ new chapter in life.

What is fair DNA pay? How do we treat the girls or the non-farming kids? Girls do take over farms, but usually, it is the sons in 95 percent of transitions who manage the farm into the next generation.

What hurts from your childhood past, or the way you were treated in your parents’ transfer? Be honest. Be clear. This affects the scenario you wish to create for your farm succession. Communicate with your spouse. Saying the words helps you put into context what is happening for you in this transition process.

I didn’t say the decision was going to be easy. It will be better if the relational capital of the family is in good shape. “I know Mom and Dad left my portion smaller because I was in a better financial state than they were.” “I have done everything on my own, I don’t expect anything from the farm assets. I’m fine.” “Everyone in our family has a different economic status, but the love and respect we celebrate is priceless.” “I am learning to let go of the outcome. Whatever Mom and Dad decide to do with their wealth is their decision.”

Now you can see why courageous conversations need to take place. Grab the bull by the horns and talk to your family about their concept of what is fair DNA pay.
It’s never too early to start.
______________________________________________________________________

Elaine Froese, an adoptive mom, farms near Boissevain, Man., with Wes. Watch Elaine’s succession segments on AgVision TV, Sundays on CityTV.

Callout: “There is nothing more unfair than treating the un-equals equally. In business, the heir contributes to the wealth to protect the wealth. If there is even distribution of wealth, there is no consideration of contribution!” —Dave Goeller

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