Dr. Val Farmer
Rural Mental Health & Family Relationships

Five Reasons Farmers Put Off Estate Planning

April 16, 2007

Estate planning can freeze you in your tracks. It is complicated. It is legal. It requires tough decisions. Most of all it projects yourself forward in time beyond your lifetime. Not exactly a fun topic to think about, let alone take action.

Here are five psychological barriers to estate planning.

1. Denial. Some farmers refuse to deal with their own mortality. They don’t get sick. When they do, they don’t go to the doctor. They think they are immortal and indispensable. That is foolish when the average life expectancy for males is in the mid-70s. It is as if they refuse to make plans so they can prevent the inevitable.

No decision is a decision. Instead of doing the hard work of thinking through an estate plan, a farmer is saying, in effect, that the state or provincial government can do a better job of dispersing the estate according to their predetermined laws. Then the government gets to keep a big hunk of it.

Dying and leaving an estate without a will can be a horror story for the next generation. It will mix anger and legal distractions into their grieving and their memories. Parents don’t want to leave their legacy of love tainted by stupidity or lack of foresight with regard to estate issues.

2. Not planning to retire. People who are not good at retirement planning aren’t good at estate planning. Better and earlier transitions can be made when people are moving toward personal goals and a future they are excited about.

Someone who plans for retirement will make decisions about succession, delegation and better long term decisions about continuity of the business than someone who is hanging on. Passing on assets and ownership will take place over a longer period. The business sense and trust of the next generation to manage the remaining retirement assets will be enhanced by an early commitment to the process.

3. Staying in control. This is a throwback to a different era when the father was lord and master of his patriarchal domain. These are often perfectionist, workaholic fathers who see the farm as their own personal aggrandizement.

They use the land as a whip to control the behavior of their farming children. By being deliberately vague and indecisive about estate plans, they keep the next generation beholden to them and too fearful to challenge their authority or thinking.

4. Deciding what is fair is a tough call. It takes a huge amount of assets to farm and the return on investment is paper thin. The farm is a business, not a legacy.

By leaving a business to several heirs, the ability of the farming heir to stay in business is destroyed. Gone are the days of the benevolent siblings who sit by passively and let their sibling farm.

The on-farm heirs want cash flow and long term investment. What is their farm labor worth? Should siblings be looking over their shoulder at their standard of living and questioning their business decisions?

The off-farm heirs want liquidity and short term returns on investment. The farming and non-farming heirs are in a conflict of interest situation. There probably aren’t enough cash revenues to buy out the other heirs equitably.

Fair is not equal. Make an early decision to leave the core assets of the business intact. The farm is not an asset to be given away. Farming is about sharing a career with a son or daughter and their family. They have been willing to take the same risks and put in the same sweat equity as the parents.

Commitments need to be honored. It is a tragedy when the farming children are left in the lurch by an "equitable" distribution of assets. Non-farm children understand that an unequal distribution of the estate is fair. However it is equally wrong to leave the bulk of the estate to the farming children with no recognition of the feelings of the non-farm children.

The estate can be divided more equally if enough non-farm assets has been set aside to offset the transfer of farm assets to farming heirs. Equal distribution is also possible when the farming children have well-established and financially viable operations. That way the parent’s farm can be treated as another disposable asset to be divided equally.

5. Avoidance of conflict. In a family that values harmony and getting along, some people think that talking about estate planning is like walking in a mine field.

One way of dealing with this is to have an open reading of the will with everyone present. Be prepared to explain the plan and be willing to listen to comments, feelings and special requests. Some parents may feel that by listening to their children’s ideas, they will be obligated to follow them.

I’ve found that is not the case. Most adult children respect the parents right to make these decisions and only want to provide constructive input. They are not pushing for a self-serving result at the expense of their siblings.

All the parents are doing is inviting feedback so the estate plan can better fit everyone’s needs and eliminate any suspicions that a particular sibling had undo influence. If they hear it from their parent’s own lips, there will be greater acceptance that the process was fair and they had a chance to react.

Skipping this step may lead to fractured family relationships when the parents won’t be around to witness the hurt and resentments created. Is that what they really want?