Stay out of the ditch for a better financial future
I don’t necessarily feel old enough to have grandchildren, but I guess I am.
It is awesome when they come home, and we get to run around and do things outside. Now they are getting to the age of wanting to investigate everything. The oldest of our grandchildren is nonstop action.
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One outside activity is going for rides on our side-by-side. She loves it. When she sits beside me, she sees every button to push and next thing you know, the windshield wipers are on, the dump box is going up, the radio is changing stations, the temperature is changing. She has no idea what each knob does, but she makes sure that the knob doesn’t stay where it was.
Before long she wants to sit on my lap and steer as we drive around on the grass in the yard or “putz” down a quiet gravel road. She steers that wheel aggressively and before long she’ll take her eyes off where she’s driving and start pushing the buttons again.
Since she isn’t watching where we’re going before long we’re heading for a ditch or a fence or a building, so I grab the wheel and straighten it out. She does not like that at all and tries to push away the hands that are keeping her safe. Needless to say she has yet to prove to me that she is capable of driving without my assistance.
Now think about that for a moment. Somewhere along the line almost every estate plan requires some oversight. Sometimes people think everyone knows how to drive and that no one will push buttons or grab the steering wheel or think they know how to drive when they don’t.
Commonly when a plan involves children or grandchildren oversight may be needed somewhere. That oversight might include rental agreements or buy-out agreements because most parents want to keep the farm out of the ditch and I do know this — it’s a lot easier to stay out of the ditch in the first place than it is to go in the ditch and then have to be pulled out.
I should also note that guidelines and restrictions do not always just apply to farm assets. In some situations, there is a large buyout or equalization of cash going to non-farming heirs. Does that need to be restricted or managed in any way? In some situations, the off-heirs only have a small amount of retirement planning that they’ve accumulated for themselves. They are paycheck to paycheck and maybe have $200,000 in their 401K at work. Then their parents’ estate plan gives them $1 or 2 million in a lump check all at once. What could possibly go wrong there?
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In some cases it doesn’t take long and they’re pushing all the buttons. The doors are wide open and they are speeding down a road they’ve never been on before. Next thing you know, all the money has blown out of the doors and windows and they are in a ditch.
Now I understand that some people have been told they should not rule from the grave, so they don’t want to be restrictive because someone may not think that is “fair.” OK, initially there may be some unhappiness or grumbling when they observed the restrictions only to discover years later that it was a good thing there were guardrails on some of the assets they received. That may not always be needed because at some point parents usually have to take their hands off the wheel, but initially, having something in place to keep them on the road might be a good thing.
Myron Friesen is the co-owner of Farm Financial Strategies Inc. in Osage, Iowa. He can be contacted at 866-524-3636 or friesen@farmestate.com.