KEMPTVILLE-Estate planning isn’t easy for anyone, least of all for the owners of family farms.
There are many succession issues that are complicated by the properties; the roles people have in a family operation; the emotions regarding the farm and the inevitable questions about the future of all those involved.
In his address to the Eastern Ontario Crop Conference on Feb. 18, keynote speaker Dr. Ron Hanson used many serious but humorous real life examples that his farmer audiences could easily relate to.
"You can buy the family farm, but remember I still own it," is how the University of Nebraska-Lincoln professor headlined his speech.
Even if the adult children own the business, mom asks, "why should I knock on the door?" of a home and business she spent years in helping to establish.
Among the many topics that arise is the immediate "two hat" issue.
As the traditional person in charge, father wears the "dad" hat and the "boss" hat. As a boss, he is responsible for managing the operation and treats his children as employees. But as a father, he is more understanding of their concerns. "If you just wear the boss’ hat, the kids are just hired help," Hanson said. "The younger generation needs to be appreciated."
"And the person on the farm today may not be the person who ends up with it. Just because I’ve always been here doesn’t mean it will be mine. A lot of things can happen in-between," he added.
There is the subject of treating children as responsible adults who can make their own decisions. If the parents tend to be controlling, they want their children to be followers. So even if the kids are technically owners, who is really in charge of the farm?
The kids may make different careers for themselves, away from the farm. Or they may wish to come back and farm.
Who is going to own it? Who will do the work and make the decisions? What about "sweat equity" of the farming children? And what about the non-farming children who also have legal and emotional title to the property? Hanson asks.
Parents who are growing older have difficult decisions to make in terms of the estate. What are the options? Should they sell it to their children? What is an affordable price that will leave the parents enough for their retirement? Should it be sold at the highest market price and the proceeds distributed?
Or why shouldn’t they spend enjoy some of the money from the estate they’ve worked hard for over so many years?
Hanson said these issues are just the tip of the iceberg in dealing with farm succession.
What happens if dad dies and mom takes over the farm? Will she operate it the way dad did or will she do what she always wanted to do with the farm that dad wouldn’t let her do?
Then there’s the "who is family?" question. Are blood relatives the only ones to be taken into the equation or should one consider the opinions and interests of the in-laws? Hanson advises including them in the discussions, to avoid creating distrust.
"The biggest fear for parents is divorce or separation, because she gets part of the farm and has to be bought out, so they have to pay twice. Some decide to keep her out to begin with. Some families adopt the strategy: the less in-laws know the better. This will backfire. Relations fail. When you keep them out of the know, you’re creating suspicion," he said.
Even worse, if the son is tragically killed in an accident, the parents will be partnering with the daughter-in-law. Will she be treated as part of the family or as an outsider?
He advises parents to be careful and consider the grandchildren, who are their son’s only legacy. "If she leaves in a huff, you’ll never see your grandchildren again."
Although it is difficult for parents and children to discuss these issues, Hanson advises against procrastination. Of utmost importance is the need to treat all the children equitably and fairly, not equally in the estate plan.
To do otherwise can be a recipe for disaster, not only for one’s own future, but also for generations to come.
News
March, 2010
Vol. 34, No. 3
NEWS
