Money, property and wealth Hanson discusses family successionWritten by Christy Martinez
That’s according to University of Nebraska-Lincoln professor of agribusiness Ron Hanson, who took the time to speak at the Wyoming Stock Growers Association’s Wyoming Agricultural Succession and Estate Transition Seminar on Dec. 12.
Hanson said that family issues tend to surface when passing on a farm or ranch.
“There are three reasons there’s trouble,” said Hanson. “Ranch and farm families are very private with what we own, what we have and what we’re worth is our business only. When you talk about family succession, wealth and inheritance must be discussed, and that’s a very private topic.”
Hanson said the second reason is that, in most families, there are favorites among the children.
“In a family business, ranch or farm there are some children who have already been chosen. Some kids within a family will be given an opportunity the other children will never be given, and when I have sat with a family in total conflict with each other, it’s always been over jealousy,” he stated.
“The third reason is that when you talk about a family estate, a succession plan and a will, in some families that tends to be a big secret,” he said. “The children think there’s a will, but they’re not sure. They think they have an idea of what Mom and Dad may have done, but they’re not sure about that. Nothing has been discussed or shared, and if the children bring up the topic they’re told it’s been taken care of.”
Hanson teaches full-time at the University of Nebraska, and he said students are his passion and love, but most of his personal time over the last 38 years has been spent working with families like his own.
“We lost a farm, and in the process we lost an entire family,” he said. “When you talk about family succession, the family issues come into play. All it takes is one of those children, or maybe the in-laws, and someone with a ‘we’ll see about this’ attitude. When I sit with a family and hear those words, I know the next time we meet there will be an attorney present, or the next phone call will be a lawyer, because those are fighting words.”
Hanson said another challenge is the “you can buy our family ranch, but remember I still own it” mentality.
“Passing ownership is one issue, and passing on control is another,” he said, mentioning that can mean more than day-to-day management of the farm or ranch. “Mom and Dad may retire and move into town, while the son and his wife move onto the home place, and that daughter-in-law moves into Mom’s house. It may be her home, but it’s still Mom’s house.”
“As a mother in Nebraska asked me, ‘Why would I ever knock on that door? I own that door,” he continued. “That’s a control issue, and that’s a family that no longer farms today.”
Hanson said another point to understand is when family ownership is discussed, particularly if the ranch or farm has been in the family several generations, there’s a lot of emotion involved.
“Many times parents make the assumption that because some of the children grew up and moved away, that somehow they left home, but you never leave home. When you talk about the family ranch, and passing that ranch on within the family, for those non-ranching children there’s as much emotion and feeling as the child who came home and never left,” he said.
Hanson said that, of all the possible issues that could be involved in family ownership succession, they all have to be resolved to everyone’s agreement if it will work.
“All it takes is one member of the family, and you’ve got some serious problems,” he noted, telling a story of five children settling their parents’ estate with the help of seven lawyers. “Those seven lawyers had everything tied in legal knots, and the brothers who were farming couldn’t buy a bushel of seed corn without a court order. By the time those seven lawyers signed off, that farm sat idle for three years, with not one acre ever planted. The bank foreclosed on the parents’ estate, and that farm was auctioned at a sheriff’s sale on the courthouse steps.”
Hanson said it was all due to one sister who had married well to a surgeon in Omaha, Neb.
“She said the lawyers cost her $98,000, and it was worth every dollar because the boys didn’t get the farm,” he said.
While Hanson said many of his family stories are sad and tragic, he did tell of one family from Atlantic, Iowa, where a son had returned to the family farm to work with his dad, who was tough, demanding and mean.
“For 27 years that son farmed with that father as dad’s slave, doing it dad’s way, and he was never once paid a dollar for his work or time, but he was always promised, if he stayed, that the farm would be his. One day the father laid into the son, and the son stood up and spoke back, and the father said if he walked off the farm, he got nothing,” said Hanson. “At the age of 51, with nothing, that son walked off that farm and started over, and the father lived another nine years and kept his promise.”
The farm went to the two daughters, who had never contributed, and the son’s name wasn’t even in the will, said Hanson.
“After the estate was settled, the girls decided to each sell their half of the farm, which was worth $12,000 to $15,000 per acre, to their brother for one dollar,” recounted Hanson. “That is family values.”
Hanson said other issues to consider are what will happen if mom outlives dad and takes over ranch management, and what happens if a parent remarries. Also, he said a family needs to consider who is “family.”
“Who comes under the family umbrella? That’s an issue, particularly when it comes to money, property and wealth,” he stated. “Who are the real members? Are the in-laws considered or treated as family, and allowed to have a voice in business matters? Some adopt the strategy that the less the in-laws know about the ranch and business operation, the better. Everything is kept a secret, and this strategy usually backfires. Relationships of trust within a family fail when someone finds out decisions are made that impact them, but they weren’t allowed to be part of the decision. You create suspicions, and once you create suspicions you’ve destroyed trust, and once you lose trust in a family you no longer have respect.”
Of pre-nuptial agreements, Hanson said they’re good business and he’s a firm believer.
“I’ve heard both arguments in my office – if I’m loved and trusted, why do I have to sign anything? On the other end, the ranch didn’t appear overnight, it took generations of work, sacrifice and commitment, and the only way the ranch will be successful is if it stays together. If it ends up in a court fight, no one wins. Talk about the reasons and the purpose, without last-minute pressure.”
“I can’t think of anything that puts family values more to the test than money or property,” said Hanson. “When money, property and wealth get involved within a family, you find out what people are really like.”