What I’m about to share started with a phone call from a farmer. There is no right or wrong in the following. No gender bias. No judgment intended. It’s just real-life transition on a farm.
The farmer said that his son was anxious to get some certainty on the yard site that he and his wife were living on but didn’t own.
The farmer admitted that the issue had dragged on for a while already and that he should have dealt with it sooner. He said that he just hadn’t been able to get around to it. Dealing with the situation will require a sub-division. Not that this is difficult to do, but finding the time was the issue.
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I don’t know this for a fact, but I suspect the son was less anxious than his spouse. This makes sense, I think. The son is family and with that, will tend to be more patient about the yard site than his wife.
However, the daughter-in-law will be motivated to get some certainty about the yard site. She will struggle in grasping the intangible value of shares or stakeholder interest that she and her husband (the son) may have in the farm, or in some future estate distribution. She will have difficulty in grasping the concept of wealth when it feels intangible to her. Thus, it becomes important for her family to own the yard site.
The discussion between she and her husband will likely go something like this: “How can we start a family when we have no place to live?” This makes sense if you look at the situation from her perspective but doesn’t make sense when you look at it from a farm perspective.
Of course, there will be a place to live and raise a family. Here’s the crux, though — it doesn’t feel that way to her.
In fact, when I followed up the telephone call with a meeting with the son and daughter-in-law, she said, “we have nothing to call our own; we don’t have our name on anything.”
For the farmer and his wife (the mother-in-law), it doesn’t get any easier. They have other children to consider, so getting to an understanding of how they feel about their ultimate estate distribution factors into the yard site decision.
They believe that any distribution must be fair, believing that equal is not possible. Fair, though, is subjective and not easy.
There is no correct or incorrect approach. Further, how retiring generation parents treat fair and equal distribution is specific to each family situation.
Some families adopt the principle of doing what they can for each son or daughter when there is a need or opportunity. What is done for one may be different than what is done for another child in the future.
Situations change. Circumstances change. The goal is to arrive at fair, but it’s usually not straightforward.
A challenge with the yard site is that it has farm buildings on it (grain storage and sheds). A sub-division that separates the farm buildings from the house would be difficult, perhaps not even possible.
Securing an arm’s-length fair market value on the subdivided yard site would help the parents in understanding the value of what is being considered.
It would be wise to require that the son and daughter-in-law talk to legal counsel and complete an agreement that would acknowledge the rights the farm has to access the farm assets on the yard site if the marriage failed at some point.
A good idea would be to include an agreement between the parents and children that puts restrictions in place if the son and daughter-in-law were to sell the yard site.
The following example is meant to protect the parents from a potential windfall sale of the acreage that would go to the son and daughter-in-law. Note that in this example, the parents have told their son and daughter-in-law that they do not have to make any payments to the parents for the yard site.
If the yard site was appraised at $200,000 and the parents have given it to their son and daughter-in-law, an agreement would restrict what they could do with the property for an agreed period.
It’s not possible to pre-think and plan in advance for every potential scenario. However, discussion with notes written down and perhaps signed into agreements helps both in the present and in the future.
