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Planning: To, From or With?

Planning: To, For or With?

There is a gap in communication between generations. The American Legacies Study, reportedly the largest survey of its type and reaching baby boomers and their parents from all walks of life, found this communication gap is not unique to farm families. About 70% of those surveyed claimed to feel highly confident discussing legacy and inheritance, but in reality only about 30% say they have actually had a comprehensive discussion about those topics.

For a “city” family, planning to transfer mutual funds or CDs, this communication breakdown is a minor problem. But when transferring a farm—land, machinery, livestock, the life and livelihood of multiple generations—it can be disastrous.

Old School Mindset

Bill and Mary Farmer come from the old school: “Children should be seen, not heard.” But their children are now in their 30s and 40s, married with families. It’s time we treat them like adults!

While two of their children have moved off the farm and pursued other careers one son, Dan, is actively engaged in farming operation with them. There are all sorts of planning issues they must face in order to be fair. Even if they have done some estate planning, do their children know what is going on? Does Dan know how to plan his life and future, and do the other children know what to expect?

Doing planning “to” or “for” your heirs?

A few years ago I realized that some people do estate planning “to” their children. They decide—with little or no input from the children—what they want, then go to their lawyer and draw it up. The children will find out soon enough: “After we die!” The planning can be very dictatorial: mandates, restrictions, controlling from the grave. It would be an unusual family indeed if the heirs embrace such parents’ wishes. Typical heirs will look for a way to break free. If the stipulations are so rigid that they cannot be broken, the heirs will forever resent their parents’ heavy handedness. Any favoring of one child over others will create permanent jealousy and dissension in the family.

Another approach is the folks who do their planning “for” their heirs. While it sounds better than “doing it to them,” planning “for” the kids can also be destructive. I’m reminded of the father who provided everything to his son: security, steady income, even a hand-picked-and-approved wife! Sonny had no worries. Daddy took care of all decision making, even made careful plans for transfer of the farm to Sonny. Eventually, of course, Daddy died and the farm went to Sonny…who promptly lost it through poor management. Having been overly sheltered, Sonny was not prepared for the responsibility.

Planning “with” your heirs

A couple recently told me that when the husband is away, leaving the farm operation under the control of his sons, the family has a rule: “If Pop was gone, no decision was wrong.” It is a simple way of saying that the sons had authority to make day to day decisions in their father’s anbsence, and when Pop returned he would not second-guess them. Some decisions probably weren’t the best, and those who made them learned from their mistakes.

Which brings me back to Bill and Mary. Their son Dan is deeply invested in the farm. He probably knows that he cannot expect to inherit it all of his parents’ estate, so he is trying to make good investment decisions, buying some land of his own. But as his parents age, his future is uncertain. How should he plan? Should he be prepared to buy out his siblings? Will he inherit most of the farm? Will he have to compete against neighbors for every acre at an auction?

It is imperative that Bill and Mary openly discuss their plans with Dan so he can position himself appropriately. Bill cannot make all of the decisions and expect Dan to stand on his own. Bill and Mary must discuss their plans with the other children, too, and should seek input from all three. When these plans—including thoughtful, considered, yet unequal distributions—are presented by the parents without embarrassment, inviting opinions from everyone, the other children tend to understand and agree. Don’t dictate. Converse.

Drill bits or holes?

You don’t buy a drill bit because you want a bit; you buy a drill bit because you want a hole. Likewise, it’s not dying that forces us discuss dying; we discuss dying and do estate planning because we want our life to matter. To make your life matter, do your life and death planning with your family.


Article authored by Curt W. Ferguson and originally published in the Prairie Farmer magazine, September 2008 issue