Reasonability and the law of unforeseen consequences

One of my strict rules when dealing with the transition process of a family farm is to include all the family members and to speak to them on a one-on-one basis. I do this so that I have a full understanding of the views and issues faced by them all.

This includes inactive children, and I am often asked by some parents why it is necessary to speak to them.

The first thing to note is that including inactive children does not confer a right by them to demand equal share. It is simply including them in fair process, which can help them understand why outcomes have been planned in certain ways and hopefully lead to consensus agreement.

Entitlement is an ugly emotion and can divide families. But entitlement is not a trait only confined to inactive children, and an all-inclusive process does not pander to entitlement. In fact, where entitlement sentiment is uncovered, it can be dealt with at an early phase of the process.

One fundamental challenge of farming is that it is a capital rich, cash poor business and many farmers are keenly aware that the business cannot survive the high cash demands that might be placed on it by inactive children as a result of inheritance. Farmers are also more likely to place a higher value on the continuity of the business

But not every inactive child who wants a fair inheritance is acting in an entitled manner. Many are motivated not by greed, but by reasonability.

Remember that for all the kids, the farm was home, where they were raised and where they spent their childhoods. They have fond memories and formed friendships and developed into adults around the farm. They have strong emotional bonds to the farm and want to retain a piece of that.

Remember for some, the option to farm was not offered. Often the oldest male child still has the advantage over younger siblings, especially sisters. Girls are still not afforded the same status as boys, and then there are those with allergies and other disabilities that prevent active participation

The significant difference between the value of the farm and the value of the non-farm assets is a challenge.

I realize that many farmers don’t see themselves as wealthy and don’t count the value of the land as relevant because it is unlikely to ever be sold, but that is a choice.

Remember that the next generation of millennials are more likely to cash in that value than any preceding generation. So be careful which set of grandkids you disinherit in the rush to preserve the long-term future of the farm.

Sticking with the theme of unforeseen consequences, the seemingly straightforward option to give the farm to the farming children may not always work out as planned.

I have seen daughters excluded from visiting the family home by over-protective spouses of farming siblings. I have seen tragedies result in the transfer of the farm out of the founding family’s hands and into the hands of recently bereaved spouses and I have seen chosen successors lose the farm through mismanagement.

What I advocate for, more than anything, is that families have open and honest discussions so that there are no surprises. These open and honest discussions should be regular events, not one-off meetings, and they should perhaps seek to create a moral agreement. That agreement could take the form of a family statement or even the beginnings of a constitution that sets out how the family interacts with the farming business.

When the family is developing these moral agreements, it should never underestimate the power of storytelling. Storytelling, especially by grandparents, uncles and aunts, can help to create the glue that holds the family together and help kids understand why things are important, especially legacy assets such as the farm. In this way we can avoid the fear of inclusivity and focus on the power of the family bond.

Bob Tosh is a farm management consultant in MNP’s Farm Management Consulting group in Saskatoon. For more information, call 877-500-0778 or email Bob.Tosh@mnp.ca.

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