Several of the lawyers in this firm have been fortunate enough to represent many folks involved in production agriculture over the years, devoting many long hours to helping our clients devise a plan for the future of the family farm or ranch (or other kinds of family businesses) when it comes time to pass the baton to the next generation. On the not so pleasant side of this topic, we have also had the privilege of representing many clients who have been embroiled in litigation with siblings or other family members over how the farm or ranch assets are to be divided. Over the years, we have collectively “been there and done that” many times for our clients, which gives us some valuable perspective when it comes to avoiding these family fights.
In the past several years, we have noticed a significant increase in the number of clients that have asked us to represent them in lawsuits involving family disputes over agricultural land. Our litigation docket contains a higher proportion of these cases than in past decades. Likewise, we have noticed that we are spending many more hours counseling our clients about these issues than ever before. Why is this happening? We think that there are several reasons:
- The primary asset of any farm or ranch is land.
- The market value of agricultural land has skyrocketed in the past decade.
- Many people failed to plan at all, and even if there was a succession or an estate plan, it didn’t deal adequately with the changing values and conditions.
- Due to pure demographics, we are witnessing the greatest inter-generational transfer of wealth in history.
- Jealousy is a pervasive and powerful emotion. So is greed.
- Control is a similarly powerful concept.
- Many heirs seem to have an entitlement mentality about what they should expect to receive from their parents.
Why is this important? Because we are constantly witnessing families who are tearing themselves apart, trying to resolve longstanding grudges, jealousies and misunderstandings, or overcome unreasonable expectations, by engaging in litigation over agricultural land with their siblings, parents or other family members. In some of these cases, despite our warnings that the fees and costs associated with litigation may well exceed any economic justification, we watch family members spending tens of thousands of dollars to chase hundreds of dollars, simply to make a point or to inflict pain upon a family member. In many cases, these kinds of fights could have been avoided by parents and children who took the initiative to develop a viable plan, effectively communicated it and made clear the reasons for the decisions that they made, and importantly, followed through with their legal counsel and tax advisors to ensure that the plan was in place at a time when it was important to do so.
This is one of those examples of the old adage, “Failure to plan is planning to fail.” There are reasons for this that everyone needs to overcome in order to move forward with planning. We all tend to avoid discussions that make us face our own mortality. Sometimes the current owners avoid planning and simply hang on too long because they want to maintain control or are uncertain about their financial future. However, if you wait too long, we often find that it is too late to create an effective strategy.
Don’t rely on blind luck. Yes, sometimes we are lucky enough to find that the heirs are reasonable in working with each other, making good decisions that do not result in controversy. All too often however, “there will be at least one stinker in the bunch,” as senior attorney Jeff Orr has said to a number of our clients over the years. That is where the litigation problems usually start.
[Stay tuned for Part II of this discussion.]