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Survey Says! Part II Current State Farm and Ranch Estate and Succession Planning

By Cari Rincker, Esq. of Rincker Law, PLLC    |  

When looking for farm and ranch estate and succession planning solutions with increasingly challenging farm family dynamics, it’s prudent to first look at the data. Rincker Law, PLLC performed a survey sent via email and posted via social media geared for agriculture producers.

Editor’s Note: This two-part series discusses results from a survey taken July thru October 2019 via Survey Monkey. The demographics of this survey were discussed in Part I in the January 2021 issue of SimTalk. This article delves into the roadblocks that survey takers noted for their estate plan, business planning, succession planning, and nuptial agreements.

Estate Planning Roadblocks

When asking survey takers what their biggest roadblock is to doing or updating a farm estate plan, the following answers were noted:

  • “[Expletive] family members that don’t want anything to change from the last 40 years”
  • “Time” and “setting aside time to review and update”
  • “Farming seems to always be the priority. On a farm, it’s never-ending work and projects.”
  • “We feel our estate plan is premature and want our parents to put together a plan first which they have not” or “the previous generation not wanting to address it”
  • “Priorities and distractions”
  • “Waiting to see what my kids want to do after college” or “getting my kids through college and into a career”
  • “Oldest generation (grandma who is 96 is still living) and she hasn’t passed down estate to the next generation who is ready to retire.”
  • “Cooperation from partners”
  • “Knowing what to try — a trust? A Business entity” [or all of the above?]
  • “Potential familial changes when one partner gets married”
  • “I don’t really know what an estate plan is”
  • “Fear”
  • “I don’t see value at our age and asset values”
  • “COVID”
  • “Cost” or “. . . too expensive”
  • “Family”
  • “Lack of professional assistance”
  • “Getting everyone together” “. . . getting everyone on board”
  • “Wondering what to do about family members that are shareholders in the ranch but not involved in the operation.”
  • “Feelings versus what makes good business sense”
  • “Spouse paying attention. Children are too young to grasp the levity of it”
  • “Appraisals”

Time should never be a roadblock but oftentimes is. Life is busy, after all. Rincker Law, PLLC recommends to clients to put estate planning in their calendar and treat it like any other deadline in life, such as the deadline to file taxes, a deadline for court, or a deadline for a customer/ client. No matter how far off this deadline is in the future, be accountable to this deadline and work backward with the estate planning attorney. Thus, if you hope to have your estate plan done before March 15th, well in advance of the planting season, then ask your estate planning attorney when you should begin. Depending on the complexity of the issues, he or she may say to start one to three months in advance of this deadline. It also may take a month or so to get a retainer appointment with some estate planning lawyers. In working backward on this form of goal setting, you may need to make your first contact with the lawyer four to six months in advance of the “deadline.” This is how to get this accomplished in a timely manner. This is also why “emergency estate plans” while someone is on their deathbed are never ideal. Estate plans require careful and thoughtful planning.

Cost should not be a roadblock. As stated earlier, there is an estate plan to fit every budget. Have candid conversations with several estate planning attorneys. Some estate planning attorneys allow for long-term payment plans, either before or after they do the work. This is a requisite part of life that must be planned and budgeted for.

The failure of other family members to have a plan should not be an excuse. If you are over the age of 18 and either is married or have children, or own any property, then you should have an estate plan. Using the failure of older generations to plan properly can no longer be a valid excuse in the agriculture community or the cycle will never break. Work on your estate plan anyway. Invite your parents or grandparents to the conversation. You cannot force them to do the work they need to do but you can lead by example.

Estate plans can be changed at any time. Have an estate plan even though life feels like it is in flux with children in college. Modify it later, if needed.

For those families that do not know how to properly handle off-farm heirs, welcome to the common quagmire of nearly every multi-generational agriculture business in 2020 as nearly all farms and ranches have the same issue. It is normal for parents to want to treat their children equally; however, as a caveat, equitable does not necessarily mean equal. Thoughtful planning should be done in this regard on the future of the business.

As for not knowing what to do, this is why every farm and ranch family should consult an estate planning attorney knowledgeable in agriculture. Stay away from cookie-cutter DIY estate plans, which may or may not be enforceable or fit your needs.

Every farm family knows how difficult it is to get everyone together. For over a decade, Rincker Law, PLLC has recommended to clients to use the holidays as a time to discuss estate and succession plans as it is the most likely time to get everyone in one place. Due to safety concerns surrounding COVID-19, some farm and ranch families may have chosen to not get together over this past holiday season; however, the two themes of 2020 are the words “pivot” and “Zoom.” Multi-generational farm families should consider having a virtual pow wow, either around the holidays or thereafter, to host a discussion. Consider having a mediator join the conversation, if needed, to spearhead and facilitate a fruitful discussion. With the use of video technology, there are no longer geographic restrictions on finding an agriculture mediator.

Finally, COVID-19 should not be an excuse. If anything, the silver lining of this pandemic is that many states have promulgated executive orders allowing for virtual notarization and will signing ceremonies, so people can execute their estate plan out of the comfort of their own home with the use of Zoom, GoToMeeting, FaceTime or other video conference platforms. Furthermore, it has only highlighted that life is precious and terminal and that people of every age, sex, and socioeconomic are vulnerable to a virus that may take their life or a life of a loved one.

Business Planning

It was positive to see that 75.44% of survey takers had some type of business entity. This was higher than expected but lower than it should be; when diving deeper, some participants who noted they had a business entity may have later selected a sole proprietorship, which had no liability shield. Nearly every farm or ranch should consider a business entity that would reduce any personal liability if there is an injury on the property, a food safety concern, or another risk associated with production agriculture. The general partnership or sole proprietorship is ubiquitous with farm families but this does not protect the land or personal assets in a lawsuit.

For the 43 survey takers who noted they had a business entity, the limited liability company was the most popular choice (21 out of 43). Eight noted they had a corporation with three having a limited partnership. The remaining participants had either a general partnership, a sole proprietorship or marked “Not Applicable.” 22 participants stated that they had multiple business entities, which is a nice plan for most (but not all) farms and ranches.

Succession Planning

 It was good to see that 51.79% of survey takers had identified an heir interested in taking over the farm/ranch or agri-business; however, this number should improve. Roughly one-fourth (26.7%) of survey takers explicitly stated there was no identified heir while 14.29% were not sure. The remaining participants marked “not applicable” for this question. This data highlights the need for farm families to communicate interests and desires in this regard; it also shows that many farms and ranches may have off-farm heirs where it is unclear whether they wish to come back to the agriculture enterprise.

Open communication is the first step to successful succession. Somewhat optimistically, 56.9% of participants stated that their agriculture family had open communication about their estate plans. This is far too low and the agriculture community needs to help farm this open communication. One option is with the growing use of agriculture mediators to help multigenerational farm families facilitate an open discussion.

The families that have been successful note the following responses for how they were able to accomplish the same:

• “Monthly meetings”, “Annual meetings” or “[Regular] meetings;”
• “Just being [up] front about it”, “continue to be straight forward” or “being blunt about it and just talk about it with our son all the time;”
• “My parents have been open about their estate plans.”
• “Third-party mediator;”
• “Face to face family meetings; I learned from [an] uncomfortable sibling experience with my parent’s estate;”
• “Plan a meeting with an attorney and invite the family members. If they don’t attend then they get cut out of the planning;”
• “Having to buy out relatives. Need to have another one with next generation;”
• “A parent who died intestate forced the conversation for us. We have since set up an LLC and Wills, etc.;”
• “We talk about it with our advisor;”
• “We have had several family dinner[s] where we discuss the future of the farm and what is to happen if someone passes away unexpectedly.”
• “Make suggestions, state opinions, and ask questions to stimulate discussions;”
• “Our immediate family decided to be very well-planned and purposeful with our planning after our “source” farm family was secretive and refused to discuss plans and ultimately provided an estate plan that all three children found unfair, that caused mostly avoidable heartache and damaged relationships.” 
• “We were forced [to have a conversation] when a family member became disabled, and a family was looking at long-term rehab.
• “In-person and use of conference call for out of town members;”
• “Kids are spread out so we have not had a family meeting but they know the basic plan;”
• “Family meeting over supper. Discuss the wishes of the grantor and how the grantee should carry them out.”
• “We dug our feet in and insisted on a family plan with our parents, but who knows when it will be reviewed and updated.”
• “My grandparents on the ranch were open about estate planning. My wife’s family also encouraged estate planning.”
• “Our estate plan discussions are most open closely following [agriculture] conferences we attend. However, discussion does not always transfer into action.”

Frustratingly, almost 48% of survey takers admitted that their farm or ranch did not have a succession plan on transferring knowledge and management skills from one generation to the next. Only 16 out of 57 (or 28.07%) have an ascertainable game plan. This is arguably more
important than the estate planning documents that need urgent attention in agriculture education.

Prenuptial Agreements

In agriculture, prenuptial agreements can oftentimes be considered taboo. However, when used properly, they can also be a prudent component of an estate plan. Many believe that prenuptial agreements are planning for a divorce; instead, consider a prenuptial agreement akin to a life insurance policy for a marriage. After all, one of the Big D’s that harms family farms is Divorce (along with Death and Destruction).

Unfortunately, only one survey taker out of 58 noted that a child or heir had a prenuptial agreement. While 47.3% did note that this question was not applicable to them but 50% of those who had children who were married admitted that there was no prenuptial agreement. As a firm that handles farm divorces, it is devastating to observe what divorce can do to families, much less an agriculture business. Agriculture educators are urged to provide more education in this area to farm and ranch families so decisions can be made whether a nuptial is best for members of the family unit.

Summary


In closing, nearly all farm and ranch families have intentions to pass their operation to a successor generation, either to a farm/ranch heir or to a third party. Estate planning, business planning and succession planning work together to help develop a game plan that is individually tailored for each farm and ranch family. There is no cookie-cutter one-size-fits-all print-a-form-from-the Internet plan. This takes planning, aforethought and special care. It also needs to be morphed and improved over time to better fit life’s changes and present goals. 

Cari Rincker is the principal attorney at Rincker Law, PLLC, a nationally recognized law firm focusing on food, farm, and family. Rinker grew up on a Simmental cattle farm in Central Illinois and presently resides on her own small farm outside of Champaign. For more information contact:This email address is being protected from spambots. You need JavaScript enabled to view it. Or www.rinckerlaw.com.

Read part I of the series.

 

 

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