Family businesses, and family farms in particular, involve unique legal issues in estate planning. The estate plan itself can be complex, as it covers a wide range of legal issues, including planning for death, disability and incapacity. There are certain tax and business succession concerns that are unique to family farms, especially. However, nothing holds a candle to the deep emotional attachments that form amongst family members with regard to family farms. This emotional element of a family business often leads to clashes and, eventually, a fight over the family farm.
Why do families fight over the farm?
Courtroom battles between family members regarding the family farm can be caused by many different situations. Yet, one of the most likely causes is the family dynamic and psychological component of every family relationship. These issues are always intensified when the matriarch or patriarch of a family dies. It is very common for long-time, generational farmers to continue to pass down the farm. However, not all family members will be willing to continue to farm the land. In many cases, the relatives who do not participate in the farming, wind up receiving much less than they expected when the will is read. Sometimes, those family members are cut out of their inheritance altogether. In those cases, family disputes are inevitable.
Discuss succession plans with the family
It is bad to assume that a child will not be interested in farming. It is also bad to assume that a child who has expressed no interest in farming will be satisfied being left out of an inheritance. These assumptions will most certainly lead to a family dispute. That is why it is so important to discuss your succession plans for the farm with your family ahead of time. Otherwise, you will be setting the stage for a family feud. This is even more the case when the value of the farm continues to increase over time.
Compensation for your farming children
Always take into consideration the relatives who have been working the farm, especially those who have been long-time workers. If you fail to compensate these relatives appropriately, you will be asking for a disagreement regarding the shares those particular family members receive. In fact, a child who is not sufficiently compensated may have the basis to bring a claim against the land based on unjust enrichment, quantum meruit, or proprietary estoppel.
Succession of the Family Farm
Whenever a family owns a farming business, a suitable business succession plan is required. If your goal is to ensure the family farm continues after your death, or even upon your retirement, you need to plan ahead. It is essential that you address the important aspects of your business, such as continuation of management and transfer of ownership.
With farms in particular, asset transfers can be more complex. Be sure to seek the advice of an estate planning attorney who is experienced in succession planning within the farming industry.
If you have questions regarding farm succession, or any other farm estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.
- Ideas for Eco-Friendly Estate Planning - February 15, 2024
- What to Do After a Terminal Diagnosis: A Practical Guide - February 14, 2024
- The Importance of Estate Planning for Members of the LGBTQIA+ Community - February 10, 2024