Dr. Val Farmer
Rural Mental Health & Family Relationships

Open Estate Planning Prevents Family Problems

February 18, 2008

My recent series on financial abuse of the elderly among farm and ranch families has generated a lot of interest. Many have horrid situations they are trying to resolve after the horse is out of the barn. The answers they need are mostly legal and the remedies expensive. Relationships have been damaged, sometimes irreparably.

What can be done to prevent this kind of family turmoil? One answer is deciding what is fair through open estate planning. Parents, while they are lucid and clear-headed about their estate goals, can discuss their plans openly and make clear their intentions so that everyone one knows what will unfold. When estates plans are secret, then opportunities for manipulation and deception occasionally happen.

How can parents approach their children about estate plans?

Gather information. Get trusted legal and financial planning advice to know what options you have. Discuss with your advisers the emotional issues in the family to help them understand the complete picture of what you want to accomplish. Your own retirement goals, needs and security should be foremost in the planning process.

Be open. The process should be open and fluid to allow the gathering and exchange of information with family members. Children are self-conscious and don't want to appear greedy or self-serving by bringing up the subject.

By asking them for their input and ideas, you as parents open the door to your childrens’ involvement. Knowing what they want or how they feel is better than imagining what they want or feel. It is helpful to know how their thoughts and special requests about the estate might be in conflict with each other.

Asking for input doesn't mean that you are going to do what they want or that you have to make a decision before you are ready. Sometimes a decision will be easier after key developments in your own or your children's lives have been reached.

Be clear about what you are waiting for. Be specific about any provisional decisions you have made. The families that are farming with you need to know that their interests are being protected. The worst estate plan is no plan at all. Don’t wait until it is too late. Things happen.

Describe each scenario for estate planning depending on which parent is the surviving spouse. The agreements need to take into account various contingencies including remarriage, disability or the need for long term care. Invite the children ask tough questions. Do your homework.

Present your plan. When you have settled your plans, discuss it with each child and get their reaction. It is better for them to hear it from your lips and to know that it was your decision rather for them to wonder if a sibling had pressured you or had undo influence.

You can defend your decision to them. You might hear something that might make you change your mind. It may seem awkward, but they will accept your decision and be at peace with it if you work it through with them. This is better than leaving them with a cold document that ignores their wishes or thoughts completely. If you aren't open, your estate could cause a rift between your children.

Fair doesn’t mean equal. The children who have made their living apart from farming don't need equal treatment in the estate. The estate isn't love. Gifts can be made based on need rather than love.

Giving unequal portions of the estate doesn't mean you care for them less or more than another. It means that you have limited options when the estate isn't totally liquid and part of the assets are tied up in an ongoing business.

By giving land to off-farm heirs, you create a conflict of interest. Farming heirs want to conserve the assets and manage cash flow while off-farm heirs may want to convert their inheritance into cash and dividends. Children who haven’t been your business partners and have differing goals will be forced into a potential long term, divisive relationship. A specific buy/sell agreement with fixed terms and dates may provide a way for a farming heir to buy out their non-farming siblings over a reasonable time frame.

The families that have worked with you have put in their own sweat equity and helped build the estate. They depend on a viable farm for their future farming careers and may deserve an unequal portion of your estate.

By farming together, you made a commitment to a farming business that was meant to continue in the future after your death. Many children who counted on that commitment find themselves hurt and betrayed by an estate settlement that is based on a simplistic principle that fair means equal.

Be fair to the non-farm heirs. You can gift cash or property on an annual basis. You can encourage ownership and leasing arrangements that make your farming heirs less dependent on your estate. The more independent they are in their farming operations, the more freedom you will have to move toward an equal distribution of your assets.

If you don't give land, what do you give? Savings, insurance benefits, and other investments that can be converted to cash. Diversify your investments beyond the farm and you’ll avoid estate headaches.

By getting to a fair estate plan through open discussion, temptation will be removed for dishonest or unethical behavior. Even if it is not perfect, the open process will prevent problems.