Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about a real-life case with real-life clients with real facts. Though, of course, names are altered for confidentiality purposes. Today may feel/sound a little different because today is not about a SINGLE client … or single case, but instead a very, very common trend amongst a group of clients we routinely serve. Who is that group of clients, you ask? Farmers.
I recently read an article in Farm World newspaper – to be clear, my husband, Justin, gets this newspaper. I can’t take credit for signing up to receive this newspaper. Justin was a “farm kid” growing up and now, we live out in the country, have cattle and tractors, so I think most would consider us to have a small farm. I had a client say once (after sharing with them about our cattle), “Hey, you have a farmette! Like a mini farm!” I was like, “Yeah, kind of!” Anyway, so THAT is why we get Farm World – Justin genuinely is interested in many of the topics that they cover, but routinely there is an article that he has me read.
Recently, that happened – and it inspired this episode actually! I’ve got a link to the article in the source links for this episode, if you care to check it out. Though, you can consider this episode a Jenny-version summary of the article.
If you’ve been following along on Legal Tea, you know I’m from Indiana – and practice law here in Indiana. When many think of this great state, they think CORN and BEANS – and farming. We’re in the Midwest, after all. My office has three offices – our main office is in the county that borders our capital, so it’s not quite as rural as our other two offices. Ironically enough, we live in this county I’m talking about, but we live in the small portion of the county that IS still rural. Our other two offices are in much more rural counties. As a byproduct of all of this, we have many, many clients that are farmers. Trust me, they 100% NEED an attorney like us – that only does this estate/elder law work.
Anyway, so today’s episode is the “why” so many farmers completely fail to plan – to plan their estate, to plan to “pass the farm down.” A very large number/percentage of farmers, according to that article to the tune of 75%, fail to have a succession plan in place for the farm. In my experience, and also as the article suggests, there a variety of reasons farmers fail to plan – and most, I’d consider to be, are excuses. So let’s chat about what those reasons are and why I think they’re merely excuses!
Reason/Excuse #1 – They want to be “fair.”
Inevitably, this comes up – so often, the kids (or whoever the beneficiaries are) are all over the place. What I mean by that is usually one of two help ON the farm, and there is usually one (at least) that have no desire to take over the farm and has not been participating in the farm operation. For this reason, many farmers feel the need or desire to “pave the way” for the farm kid to take over when they want to retire or when they pass – but they don’t want to say it out loud because what about the non-farming kids?
One of my favorite things I say routinely to clients – whether we’re talking about the farm, a business, etc. – is that sometimes fair is NOT always equal. This is not some earth-shattering idea. For example, the kid helping on the farm is putting in significantly more “sweat equity” into the farm than the kid NOT helping on the farm. Is it FAIR to give that kids more or all of the farm? Perhaps. Will things be equal at the end? Honestly, probably not. But remember, fair is not always equal.
Beneath this reason/excuse is usually fear – they don’t want to “make the one mad” that is not farming. I understand. So often, families, when talking about when their kids/beneficiaries inherit, think that treating them equal means you love them equally. And, if you give one more, you love that one more. No. Just stop that thinking. This is your plan, you’re in the driver’s seat, and you should do what YOU want to do. Period. End of story.
Reason/Excuse #2 – The cost. Ahem, the legal fees.
Okay, I get it. I don’t like spending money either – but when it comes to important stuff, I don’t question it. For example, we have a highly-qualified, highly-experienced CPA/Accountant that does all-things-taxes for us. He’s not cheap, but is the peace of mind worth it knowing that he’s the best in the biz and doing the right thing … is priceless. I’d MUCH rather pay him to do a good job than get in trouble with the IRS. Same thought-process here, farmer friends. Professionals come with fees, yes, and they’re not going to be cheap – but will they be worth it? FOR SURE, if you’re working with a good, reputable, qualified professional.
The article mentioned something hilarious – I laughed out loud when I read it, so I’m going to mention it here – “Remember, a large floater tire for a spreader, combine or other implement can easily run $6000 to $8000. If the legacy of your farm is not worth the price of one tire, I would question how committed you are to that legacy.” BOOM – mic drop. YES!
Insider secret – sometimes, hiring professionals, especially if you operate your farm truly as a business entity, could mean you could “write off” some of the fee on your taxes. So, if you’re looking for an incentive, there’s a little nugget for you!
Reason/Excuse #3 – Where to Begin? The Overwhelm!
I often say, “The hardest part of estate planning is STARTING the process.” So often, when a prospective client ends up in our conference room, they are very likely moving forward with some sort of plan – that’s because making the appointment takes a lot of courage … it sounds silly, but it’s not. From there, the conversation flows, the ideas flow, and we’re moving through the process. So, the whole idea of “I don’t know where to begin” reason/excuse … let this be the end of that. The “where” to begin is getting the conversation started by making an appointment – from there, don’t him and haw, keep moving forward.
One thing I’ve heard, along these same lines, is that sometimes people don’t know WHO to call. Again, I somewhat think that’s an excuse too. Ask around to your fellow farming friends – ask them if they’ve done their estate planning; if they have, who did they use and did they feel the attorney did a good job? If they have not, ask others. In our rural offices, a very common referral to us is from fellow farming families – you know, the Smiths took the initiative to do their plan (and realized we know what the heck we’re doing at my firm) …. And the Smiths told the Collins Family … and the Collins Family told the Thomas Family … and the Smiths told the Forrest Family … etc.
Just like we talked about last episode, too, check your referrals against the internet; check them against local/other professionals; etc. Do your homework, and that homework should lead you to the right place!
Reason/Excuse #4 – Putting it off/Procrastination.
One thing I routinely hear from clients is, “Okay, Jenny – if I die, ….” Oftentimes, I’ll stop them in their tracks and say, “If? You mean … when.” Unless someone out there has some secret magic potion or something, we’re all going to pass away. The somewhat-icky thing about doing what I do for a living is I see and hear a lot of cruddy stuff … 30 year olds who have passed away … 40 year olds who have had strokes … 50 year olds getting diagnosed with dementia … etc. Life, as we ALL know, is short and it is certainly not guaranteed for a long time … nor forever. So, if we KNOW we are going to pass away, but not sure when, why would you keep putting it off? Especially you, farmers – sadly, there are many accidents in farming. You work with some heavy machinery; there are grain bin accidents; you’re often on the road going between different tracts; you work early mornings and late nights (meaning you’re sleepy and more prone to accidents); etc.
Along these lines, a big reason we help farm families, too, is to protect the family farm against long-term care costs and Medicaid. It is POSSIBLE, but the best plan is one that is done proactively and not in the 11th hour. Even in the 11th hour, there are options, but oftentimes, they are not fun options to discuss.
So yeah, I don’t want to scare you with all of this “procrastination” talk, but at the same time, get a move on it, friends.
Reason/Excuse #5 – Operation “Do Nothing.”
The ol’ “Oh the kids can figure it out when I die.” Well, that IS a legitimate option on the table, but why on earth is that the BEST option on the table? You worked your tail off to be in the position you are in – and you are NOT going to pick the best option on the table? I’m certain you’d rather your kids/beneficiaries get the farm rather than the lawyers and IRS who get to pick up any pieces that you left for your family – and if your peeps start fighting, it’s a BAD day for your estate/family and a GOOD day for an estate litigator. This is not rocket science, people. You either clean it up and do things now – or it gets cleaned up later (likely at a much higher cost).
I know much of this episode has been somewhat tongue and cheek – I’m trying to keep the topic “light” and at the same time, call your attention that so many, if not all, of the reasons/excuses we hear from farmers on NOT doing any estate planning are silly excuses. One of my favorite things to say is “We are a product of our choices.” I firmly believe that, too. So, you can CHOOSE to do planning or not -- but there sure are way more downfalls about the “or not.” At least in my personal and professional opinion.
Alrighty … that ends this cautionary tale episode! Next week’s topic is a current event/current trend -- something I’ve seen or run across that I think would be interesting on here. Until then, Legal Tea Listeners…be well and talk soon!
Sources:
https://farmlegacy.blogspot.com/2022/01/traditional-method-of-farm-succession_16.html