|
| There are a lot of us old farmers that avoid this subject like the plague. Maybe we think we are going to live forever. My situation was different than most. I count myself very blessed to have had a very good off-farm job that allowed me to make the plans and structure things the way I did, so it might not work for anyone else. My dad discouraged me from farming all through high school and college even though that is really what I wanted to do. So my wife and I bought a quarter right after college. That was a struggle and of course necessitated my getting the aforementioned off-farm job. Fast forward 20+ years and my oldest son got out of college and bought his own truck. I had also been able to buy more land. Another few years and he wanted to quit trucking and I still wanted to farm. We had each put together some equipment and I had some land so this is what we did. We created an LLC and put all of the equipment in it and divided the ownership up accordingly. I had 89%, he had 11%. The LLC became the tenant for the land that I owned on a crop share lease as well as other land that we leased. We started off by paying him a salary and I kept my day job. We had very little debt at first but over the next few years bought equipment that required incurring debt, again in the LLC. This made him part owner and able to have input into the operation and have the responsibility of being a partner. When I turned 60 I left my job because it was always my goal to farm full time with my son. (I am now 72.) Since that time I have acquired some additional land and a couple of years ago set up another LLC which is the land owner, within a trust. Also my grandson graduated from high school and he has joined the operational LLC and we pay him a salary as well. I don’t draw a salary but my wife and I live well on my IRA and our social security. The income from the land LLC will go to such things as things as installing irrigation on a couple of the places, etc.
My intention is that the operation will pass to my son and grandson when I am gone. The land will go to my son and my two kids that are not involved in the farm operation. They will be able to share in the income from the land LLC but it is structured to discourage them selling their shares at least all at once. That would put my oldest son in a bind but they can get out if they want to by taking a 5% haircut from an appraised value. Also my oldest son can buy them out even if they don’t want to sell by paying 5% over that appraised value. My hope is that the land LLC continues into the future to my grandchildren and beyond but we will see.
Farm succession is a tough subject. My advice is to encourage, not tell, your dad to not ignore the subject out of consideration to you and your siblings. I believe that retaining an estate planner is well worth the cost in family relations. Another thing to keep in mind is that each sibling needs to ride herd on their own spouse. Spouses create more problems than siblings do many times. Several years ago I wrote my kids and their spouses a letter explaining what my and my wife’s intentions were. I started my letter by telling them two things. First that we didn’t owe them anything. We raised them, put them through school, taught them to be good, productive, Christian citizens. What they made of their lives after that was up to them. Then I told them that what we said was fair in how we intended to split up our estate was fair, no debate. I closed the letter by saying that it would break our hearts if what we were leaving them caused a rift in the family. No amount of money or things are worth that. I’ve seen that happen way too often. We sat down with eacht child and their spouse and read the letter to them and told them to keep their copy to remind them what we said. I gave them a chance to ask any questions that they had or if any came up I was glad to visit with them anytime, just remember rule number 1 and rule number 2. Will it work? I hope so but at that point it won’t be up to me. Is it a perfect plan? I am sure it is not but I haven’t figured out how to make it better. | |
|
Farm succession
