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Find fairness in farm transition

Elaine Froese for Progressive Dairyman Published on 06 August 2018
Fairness

Cows don’t like to get stuck in muck. Many stressed-out dairy families are also seeking solutions to get transition plans unstuck and moving again. Fairness is a key challenge in the process.

BDO’s Jim Synder has a daughter who thinks families who see fairness defined as “helping everyone be successful” will be better off than those who equate fair with being equal. I’ve created a session on fairness, and here’s what kept me up at night, mulling thoughts and experience into a practical tool for you.

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FAIR … financial transparency, attitudes, intent and roles

Financial transparency

With financial transparency, parents are not silent on their desires for the future and openly share the farm books, viability and their personal wealth situation. Merle Good has coined the term “personal wealth bubble,” meaning the money parents can draw income from over the next 20 years and access for gifting to others, farm and non-farm business heirs.

Have you sought out a financial planner to create more certainty about your future financial security? Do it.

Debt servicing is also part of this discussion. How much can the next generation really afford to service? What parts of the farm assets are you willing to gift, roll over or have purchased? If you want to give an equity position to non-farm heirs, you can do that with well-written land rent agreements. Check to see whether your successor wants to be in business with his or her siblings.

Money does not equal love in my books, but for many it does. I have also seen parents fret about working to give monies to less fortunate children in an unrealistic attempt to make all the kids economically equal. This is a foolish goal. Have you ever asked your adult children what they expect?

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Most decent young adults I have the joy of working with say, “Elaine, we just want our parents to have some fun and enjoy the fruit of their labor. We will be OK. We will find a way to make it work.” (Yes, I know you are wishing you could adopt those kids.)

Many young people with great educations and entrepreneurial skills may end up wealthier than their farming parents. Also, consider the gifts of vehicles, house down payments and university degrees (valued at $200,000) you and the farm have already facilitated. What do you owe your children?

Do you have a clear picture of how many families the profitability of the farm can support? Are you having a hard time saying no to the adult child who is seeking to return against the wishes of your current successors? This is where operating agreements, codes of conduct and shareholder agreements are helpful tools to be clear about role expectations.

Attitudes

Attitudes about money create havoc when your heirs feel “love equals money.” What money scripts are you carrying around? Do you have a scarcity mindset or one of abundance?

Read The Soul of Money by Lynne Twist or Wired for Wealth by Brad Klontz or Moolala: Why Smart People Do Dumb Things with Their Money by Bruce Sellery. You know too many sad stories in your area about families who never speak to each other after the parents die.

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I suspect the fights are about the high value put on money, land and the lack of forgiveness or grace to allow parents to make their own choices. My experience with estates has been rewarding when my main goal is to have richness in relationship and not worry about the size of the inheritance, if there even is one.

So Bruce Sellery’s penetrating question is: “What does money mean to you?” Spend some time over coffee talking with your spouse and your adult heirs.

Our values and cherished beliefs will drive our behavior. If someone is secretive about their plans to be fair, think about open-ended questions you can use to draw them out. “What does fairness look like to you?” Listen carefully to the person’s concerns.

Many people have been “burned” by their family of origin experiences, and there is usually some history or a back story driving their decision-making. Ask, “How did you get the farm from your family?” Be curious about women who maybe did not get much compared to their farming siblings.

Intent

Intent is a key tool of conflict resolution. As mediators and conflict resolution communicators, we work hard to find out each person’s intent, what they truly desire and want. In the case of farm transition, there are many players with various needs: the founders, the successors, the non-farm heirs, sibling groups, in-laws and extended family or grandparents. You can see there are a lot of players to consider in the family dynamic web.

Work hard to be clear about sharing your intent and then listen for what effect that has on the other party. In my case, I was clear with my parents I did not intend to expect a large sum of money from their estates, as they needed their finances to focus on the farm’s financial success.

My intention was to have their love and time for my family, as much as they were able to give while they were alive. We spoke about this openly at a family meeting facilitated at their accountant’s boardroom. My mother died a short six weeks later, age 65.

If the parents don’t agree on their intentions for the fair distribution of assets or gifts, or they fight about what fairness is, then the task is to work with the founder’s vision first.

Roles

Role expectations about what a good day on the farm looks like for Dad and Mom and when the successors can be the main manager with control are also fairness discussions. Is it fair for an 80-year-old to still hold the majority of ownership and control?

Is it fair for his 60-year-old child not to have power? Or the grandparents’ 35-year-old employee/grandchild not to have a concrete equity position?

What do you want your legacy to be? Start figuring out what fairness in farm transition looks like to you and keep fairness a part of the entire transition process. Act.  end mark

ILLUSTRATION: Illustration by Kristen Phillips.

Elaine Froese, CAFA, CSP, has had three major fairness discussions with her parents, her farming brother, her in-laws and her successor. Visit her website.

Find Elaine Froese’s video presentation on YouTube at Finding fairness in farm transition.

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