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

I could feel the frustration and pain as I read her lengthy email describing an all too common scenario for farm families on the topic of inheriting farmland.

It looks like this:

Aging parents have been pressured to be “fair” to the siblings who don’t farm. And the non-farming siblings also seem to have noticed farmland values have increased significantly.

So now, they’d like to have a piece of that valuable farmland as part of their inheritance.

The older folks in this scenario haven’t planned financially to be able to creatively take care of gifts to the non-farm heirs.

They ignored warnings from lenders and financial planners, advising them to build 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. It’s ideal for them to own all the land. But 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, there are some courageous conversations about inheriting farmland that need to be had immediately.

In this case, the parents could be well into their eighties and scared that a family fight is brewing.

They’ve avoided conflict at all costs when they should have been embracing solutions for conflict prevention.

Want to read more about dealing with conflict on the farm? Be sure to visit this post. 

Putting money into stocks, other real estate, and mutual funds did not appeal to them. They were more worried about how to meet the operating line and mortgage payments during the tough years of the eighties and nineties.

Now, they’re 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 from 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 a key question:

“What does fairness look like to you?”

When you answer this question, remember to consider that one sibling needs access to all the farmland to keep the farm legacy viable.

Merle Good recommends long-term rental agreements. This way the farmer can 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 they may ask for the fair market value, rather than FFP (Fair Family Price).

I don’t see this happening too often today.

If quarter sections are selling for over $400,000 per quarter, it might 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 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. It’s worked out well.

Six years later, our son’s second quarter had doubled in value—these kinds of returns are why there are fights over inheriting farmland.

[Tweet “#Farmers, learn how to solve all #farmland dilemmas when it comes to your #succession.”]

So, how can you solve this expensive farmland dilemma? It starts with these five steps.

1. Recognize that a transparent conversation with all your heirs is long overdue.

Consider asking each adult child what they expect as far as inheriting farmland and what they’ll get from your estate. You should also ask what fairness looks like to them.

You might be shocked by the answers.

I’ve 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’m not expecting to inherit any farmland.”

(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-farming 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.

This person puts a high value on the legacy of lasting respectful family relationships. They expect 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.

For more information on talking to your non-farming heirs who expect to inherit farmland, read this post

3. Call a facilitated family meeting.

Call a family meeting with your trusted advisors as facilitators.

Farm family coaches may team up at that meeting with the lawyer and accountant so everyone hears the implications of each scenario presented.

Professional advisors have seen creative solutions and know what a good fit will look like for your farm family. They’ll help make sure everyone understands your intent, your fears, and your legacy vision for the family and the farm.

Be sure spouses and “almost married” partners are at the meeting so nothing gets lost in translation.

Accept the fact that feelings will create tears, so have a tissue box ready, and be willing to sit through deep emotions.

Use this meeting as a discovery process, and don’t get locked into one way of creating solutions.

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 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 living and debt servicing, you might be surprised at how well siblings are actually doing.

I’m saddened when I hear about a grumpy father-in-law who assumes his daughter-in-law is not pulling her weight with income generation. The truth is, she’s the real support for the family’s living needs!

5. It’s not the parents’ responsibility to make sure their children are economically equal.

I know young entrepreneurs who are fiercely driven to make financial gains on their own without heaps of gifts from their parents. For those who chose to make their own way and not rely on parental financial assistance, this could equal self-respect to them.

It’s 2019, and some adult children are already wealthier than their parents according to their net worth statements.

But remember—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.

Would you like more help with securing your farming relationships, handling farm transitions, and inheriting farmland? Contact me today to learn about my farm succession planning and farm family coaching!

If you enjoyed this article and you’d like to dive deeper, don’t miss these posts:

The 5 Ways of Dealing With Conflict on the Farm
How to Communicate To the Different Generations on the Farm
Keeping Farm Transitions Fair

This article was originally published on October 11, 2016, and has been updated. 

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