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Farm transition planning meets the four H’s

Bohr_Farm Transition

Since 4-H began more than 100 years ago, it has become the nation’s largest youth development organization. The 4-H pledge is simple yet effective:

I pledge my head to clearer thinking,

My heart to greater loyalty,

My hands to larger service,

and my health to better living, for my club, my community, my country, and my world.

Our family has historically concentrated in two project areas in 4-H — beef and presentations. In our club, a project and a presentation were mandatory every year — no exceptions.

The organization has proven profound in my life, and many others, long after direct involvement has passed.

From time to time, clients send me letters or emails to update their family situations since our last meeting. I pulled portions of four different letters (their names changed to assure confidentiality) and reprinted them in the spirit of the four Hs (Head, Heart, Hands and Health) in hopes that it may help your farm transition planning process.

Head

“Larry and I wanted to thank you for our meeting last week. We have made the conscious decision to have a purposeful plan. We want all of our children to know that we have talked this through in a painfully detailed manner. We do not want our life’s work to pass with accidental results.

“We own a family farm — not an investment farm. We want our children to know that there is a difference. A family farm should be priced differently than an investment farm.

“Thanks to you, we understand this with 100% certainty and are now prepared to have our family meeting and the ‘reading of our will.’

“We agree 100% that we should be present for the ‘reading of the will’ to witness and explain it in our terms. We plan on the meeting every five years. Larry and I hope to be around for another 20 years. If God is willing, and we can have a chance to review it with them four times before we die, maybe no one will show up at our actual reading of the will when the time comes.

“P.S. We decided to invite the in-laws to our next meeting at your suggestion. We agree it’s better that they have a chance to hear it from us and reduce the chance for them to be a silent foe of our family plan.”

Heart

“First off, I wanted you to know that we just had our end-of-the-year income-tax planning appointment with our accountant. What a huge difference it makes to deduct the extra $100,000 in rent expense to our land LLC. We should have done that many years ago.

“More importantly, I wanted to report to you in case you want to share it with others about how difficult it was for us to get out of our comfort zone and create our family land plan.

“We now realize the land entity buys our family time to figure out who in the family wants to be a holder of the land, who wants to be a seller of the land and who wants to be a buyer of the land.

“The entity allows the process to play out naturally for our family over time. The last thing we want to do after spending 40 years putting this farm together is to force our children and grandchildren into making a lifetime decision in a short (emotional) period of time after our death, particularly in today’s marketplace of high land values and exploding interest rates.

“We have a heritage farm that means a great deal to us. It’s a way of life and has been a place to raise our family. In our hearts, we feel like there are some things that are not to be divided. My grandmother’s pie plate collection and our wedding rings are examples. Our family Bible and our family farm are also on the ‘do not divide’ list.”

Hands

“Well, it happened. Throughout our planning process, we discussed this, and you said it could happen. We never thought it would.

“Our oldest is now questioning how we could give 1% of our operating entity and our land entity to Billy each year as non-cash compensation for his work on the farm. We discussed this at our family meeting, and you sensed the tension between Mike and Billy (and their spouses).   

“There has always been sibling rivalry, but now that we have communicated our plan to transfer equity to Billy for his lack of cash compensation, Mike is challenging our decision. We want to reward Billy for his efforts in building our estate. We could not have done this without him.

“As we discussed, we don’t believe that people in agriculture live in an air-conditioned world. Our hands are dirty and our clothes are worn. Despite all of our technological advances, we humbly owe our existence to the 6-inch layer of topsoil, and the fact that the Lord blesses it with rain.

“We do not want a windfall inheritance to diminish Billy’s opportunity to continue our legacy. We wanted you to know this in case any of our children reach out to you. ... Process management for us is much better than crisis management.”

Health

“Richard has been diagnosed with cancer. It has been an adjustment, but our faith and love have been strong for each other.

“We are grateful for our health to this point and are glad to have a plan in place to fall back on. It is one less thing for us to worry about as we prepare for the journey ahead of us.

“We were ill prepared in 2020 for the derecho damage to our farm. We were helpless to Hurricane Ian damage in Ft. Meyers earlier this year. We are prepared spiritually and financially for Richard’s sudden change in health.

“We are confident in our plan for the farm and have little concern about decisions and who will be making them in the future.”

Creatures of habits

At a young age, we learned through 4-H that it is better to halter-break a steer in the fall when he is 300 pounds than to wait until spring when he weighed 1,000 pounds. As the steers got older, they developed a mind of their own and the strength to do things their own way.

In some respects, having a land management plan and communicating it to your heirs can be very similar. The sooner you start with a process to create habits, the easier it is to “train” future owners.

My hope is that your farm transition plan will combine the best of the four H’s — the knowledge to think clearly with your head, the loyalty of a heartfelt plan, the opportunity to work the land with their hands and good health to see the plan to an old age.

For 30 years, Steve Bohr has been a partner in the farm continuation firm of Farm Financial Strategies, Inc. For additional information on farm continuation issues or if you have a question, please contact Steve via email at Bohr@FarmEstate.com or by phone at 1-800-375-4180.

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