Here’s some text audience feedback from my session about fairness in farm transition:
“Dad passed away 4 years ago and I’m one of 4 kids but the only one that is farming. Everything is planned out but it is difficult to have others (non-farm siblings) quantify the equity that I’ve put into the business for the last 30 plus years along with Mom and Dad, and for them to understand it’s not just a simple split 4-ways anymore.”
“If parents don’t want to take responsibility for the family dynamics on-farm/off-farm family members whose responsibility it is or how to move forward if parents block the process?”
“How can you deal with a father who does not want to start selling land to one farming child at a reduced price due to other children not being able to purchase? He sees it as unfair, and is worried about what the other non-farming child will think he’s owed something.”
Just let those texts sink in for a bit. As the founders, you are running a business and working on a transfer of labour, management, and ownership. As parents, you are working on navigating a myriad of expectations regarding the transfer of personal wealth. Unfortunately, many of you have little on the personal wealth side of the ledger and are depending on the farm solely for your income streams as you age in place on your farm. It takes courage to explore what your farm family successors and your non-farm heirs are thinking and feeling.
Many families are avoiding hard conversations. Farm family coaches are highly trained to facilitate these courageous conversations but first, you need to have a willingness and readiness to do the work.
The farmer above who has put 30 years of labour into the parent’s farm would like his widowed mother to quantify the equity he’s invested in the business. This is known as “sweat equity” or delayed compensation. This can be written down with agreements where the son takes a wage for many years at a lower than market rate say $50K a year when the going rate was $75K. The difference of 30 times 25K is $750K of equity not transferred. This is a simplistic example, but if nothing is written down and there is no tracking with agreements on paper or digital files, then things that are not measured cannot be changed easily. (Ask me for Dr. Baker’s tool on sweat equity calculations here.)
“It’s not just a simple split 4-ways anymore”. Exactly. This is a mindset of “equal,” which is not workable with high land prices and the need to keep the profitable, viable business intact. The personal wealth assets of the parents can be allocated to the non-farm heirs, or there can be very long-term land rent agreements to the farming child if a non-farm heir owns a piece of farmland, but most farmers I know don’t want to be in business long-term with their non-farm siblings and in-laws. The underlying fear is the farm successor “cashing out” in a few years, which can be handled with legal agreements and caveats like lawyer Mona Brown’s “Poison pill,” where land sale gains are rebated back to all the heirs.
Where is it written that it is a parent’s responsibility to keep all their children economically equal? Not in my parenting book. Each one of your children has different needs to be successful. Many farm families have already given economic boosts with education tuition, trucks, cars, and down payments on houses. What do you owe your children? Discuss this. Ask your non-farm heirs precisely what they expect from your estate as an inheritance and then converse about those expectations. Many young people want their parents to enjoy the fruit of their labour while they still have decent health. Inheritance to some farm kids is a bonus, not a right. (Those are the ones you might like to adopt!)
The text above that mentioned the parents blocking the transition process speaks to the common barrier of parents avoiding conflict and choosing to do nothing. Not deciding to act is a decision, it’s called procrastination and fear. The responsibility for positive change in making transition decisions lies with all the family. The successor can be the driver of the process of hiring facilitators, coaches, and advisors and the founders are wise to engage in professional help to get unstuck. More farm families are now getting ag-informed therapy to help deal with deep-seated anger or frustration to find better ways of navigating dynamics with family members who don’t communicate well or choose to be inflexible with their thinking. In several cases over the past 2 decades, I have given the younger folks permission to leave a non-workable dynamic to start a farming venture with another family or on their own. It’s called a “Necessary Ending when things don’t work out,” according to author Dr. Henry Cloud.
Fear of conflict and lack of harmony or “getting along” is real for many farm families who don’t face the current reality and work to create solutions. To get clarity of expectations you need to come to the table for safe, respectful conversations. If you can’t create this on your own, you are wise to reach out for professional help. You also can only be responsible for your own choices and behaviour. As much as you would like to take out your toolbox and “fix others,” the other family members are responsible for making their own emotionally healthy choices.
Marilee Adams, author of “Change Your Questions, Change Your Life” has a choice map, that encourages us to choose the learner mindset path, not the judger mindset. Take a few moments to reflect on some of her questions as they relate to the circumstances of transferring land and wealth in your transition.
➡️ What happened?
➡️ What do I want for both me and others?
➡️ What can I learn?
➡️ What assumptions am I making? (Do you assume everyone needs to get the same inheritance?)
➡️ What are the facts?
➡️ What are my heirs thinking, feeling, and wanting?
➡️ Am I being responsible?
➡️ What is possible? (financial planners, coaches, accountants, and lawyers have seen success in other farm transitions, so they can help you explore possibilities.)
➡️ What are my choices?
➡️ What’s best to do now?
And here’s my closing question, “Tell me what fairness looks like to you, and what do you need to be successful?”
Elaine Froese, CSP, CAFA, CHICoach, and her coaching team are here to work with farm families in transition to find harmony through understanding. Listen to Elaine’s podcast here.
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