|You’ve Got the Will and the Mind|
My grandfather has always said, "If you sweat and bleed on a place, you’ll always return to it." I sweated a great deal and shed a bit of blood on his commercial cattle and peanut operation during weekends and summers. I would have loved nothing more than to return to the farm to raise cattle, but, as I neared college-age, I quickly understood the size of his farm could not financially support me – much less a family. My grandfather was also at the point he did not want to assume any more risk or liability, thus ruling out the option of new enterprises and leveraging of debt.
As I work with farm families, I find they would love to have their children return to the farm, but they are uncertain if it is feasible. Some common questions that arise: can the parents afford to pay the child a fair wage from the operation, how will the child’s participation in the operation affect the parent’s retirement and will more land be needed through renting or purchasing in order to sustain a new level of financial need? These questions and many more can make your head spin.
The first step is to start early (don’t put it off) and seek help from someone outside the family who can provide objective advice. Five Extension economists throughout the state, whose focus is farm management and agricultural enterprise analysis, are here to aid in the decision process.
As I said, I would have loved to work the family farm, but, since I couldn’t, I decided to stay as close to agriculture as I could. One of my goals now, as an Extension economist, is to assist farm families with management decision on their farm and ensure future generations can continue the operation and/or ownership of the farm.
Farmers have strong ties to land and highly-value family. My grandfather is no different. He wants our family to pass the land down from generation to generation and teach each generation the value of hard work on the farm. He does understand men and women value land differently and spouses who marry into the family can have positive and negative impacts on the long-term function and structure of the farm. But what can you do that is fair for all parties involved, but protects the integrity of the farm? As always, grandpa has life experiences that answer the questions.
As a youth, he was operating a John Deere A with a number 5 sickle bar mower – the days before hydraulics. As he was cutting the fields, he would need to lower and raise the cutter. To do this you would step down on a chain and operate a lever. It so happened, he tried and tried, but couldn’t raise the mower. A worker saw him struggling and went over to help. The man said to him, "You’ve got the will and the mind, but you are too light in the behind." That is, a 12-year-old boy might know how to raise the mower and want to raise the mower, but he could not since he didn’t weigh enough.
So how do we relate this to keeping the farm in the family? You first must know what your goals are for the future of your farm. Second, you must be motivated to see it through. Finally, you’ll need someone with experience to help implement your plan.
My grandfather knew he wanted his sons and grandchildren to own the farm, but he didn’t want any one family member to force other family members to buy their share or sell the entire farm. He also knew divorce and lawsuits can undo any well-made plan. To accomplish his goals, he enlisted the help of a financial planner and estate lawyer. With their help, he created an entity which allows all family members to participate in the business, but limits who can own and control the farm.
So where do you begin? First, determine your goals for the farm. Who’s going to operate the farm and who’s going to own the farm? Remember, fair is not always equal. That is to say, if one child works on the farm all their life and the other doesn’t, it may be fair for one child to get the farmland and the other child to get cash or other assets.
Second, once you have your goals written down, communicate this with your heirs. Once all are in agreement, develop a written plan to guide you through the process. Third, with your written plan in hand, you will want to seek the guidance and advice of professionals. This includes, but is not limited to, a tax professional, financial planner, estate attorney and insurance agent. Remember, Extension economists can aid in examining the feasibility of your plan.
Fourth, and sometimes the most overlooked part, is to implement your plan. This may mean drafting a new will, deeding property to other family members or creating business entities. The guidance of professionals who work closely in these areas is a must.
Finally, be sure to revisit your plan once a year and make changes as needed. Life-events can change your plan. Family members are born and die, they marry and divorce, they get jobs and get laid-off, they are sued and some just go flat-out crazy.
As I can personally attest, don’t take the attitude of, "I’ll let the kids deal with it when I’m dead." This attitude will rip a family apart. If you’ll make the decisions now, the family will respect those wishes and hopefully work together and maintain relationships long after you’ve left this earth.
The items covered in this article are informational only and are not meant as tax, legal or financial advice; consult with your tax professional, lawyer or financial consultant for guidance on the issues specific to your situation.
Thomas Hall is an Extension economist with the Alabama Cooperative Extension System. For more information about farm management and financial analysis, please contact your county Extension coordinator or an Extension specialist: North Alabama: Holt Hardin, (256) 574-2143 or Robert Page, (256) 528-7133; Central Alabama: Jamie Yeager, (334) 624-4016; Southwest Alabama: Steve Brown, (251) 867-7760; Southeast Alabama: Thomas Hall, (334) 693-2010.