What is an equitable split of a family farm?

My wife and her brother are the only heirs to her parent’s family farm. Her brother has been doing all of the farming for the last couple of years as their father is in very ill health. I don’t farm. Never have. Never will.

My wife has been told that “the financial guy” is working on division of the assets and she thought it was going to be around a 65-35 split with my wife getting 35%. Honestly, I don’t know what to think about it. I definitely feel that he deserves more than my wife does since he’s been doing all of the farm work. I don’t believe that the farm is currently profitable. There’s a distinct possibility that a wind farm will be built in the property sometime in the future. There is already a weather station on the land to determine if there’s enough wind to justify it. When it was erected, those involved thought that there was plenty of wind.

I don’t need the money but I think I’d feel better about a 60-40 split since that would give him 50% more than us. I’m primarily thinking about my kids. It doesn’t seem to me that my kids should be entitled to that much less than his.

I’m just looking for advice/opinions.

I don’t know all of the details and this is just my opinion. But I feel that being as the brother’s been working on the farm, a 65/35 split in his favor is reasonable.

If your brother’s been doing all the work on the farm and wants to keep farming it, and you don’t want to farm it or live there, and you don’t need the money, I think your brother should get the whole thing.

However, it’s your father who’s going to decide this. It’s his farm and his money; he gets to decide how to leave it.

If you claim a 40% share, or even 35%, are you going to require your brother to either somehow come up with the money or sell the place in order to raise it?

I would ask the financial guy how he came up with that split. What it by dad’s request? If the farm 65% of the dad’s assets so bro gets the farm and your wife gets everything else? Was the financial guy hired by the brother to come up with a “fair” division? I’m not going to question your brother’s motives but what happens if bro gets the farm and next week he signs a lease to the wind farm making $$$ without having to work the farm again? IANAFA but I would include in any paperwork that the split of any leasing income whether it be wind, mining, fracking, etc. be split 50/50.

Wait, is this your brother or your wife’s brother? If this is your in-laws, then stay out of it, frankly, and let your wife decide what makes sense for her family.

65-35 sounds fair to me. If your BIL doesn’t do the work your wife’s share will be worth less. Keeping him happy with arrangement so he will put in his best efforts is to your advantage.

No, I won’t make my BIL do anything. If he wants to continue to farm our share of the land, I’ll lease it to him on extremely favorable terms. My guess is that I’d just charge him enough to pay the property taxes on it. If he isn’t able to continue farming that much land, I’ll try to lease it to someone else or sell it if I can’t find someone that wants to farm it.

The financial guy has worked for my FIL and MIL for a long time as their investment advisor. My BIL didn’t hire him. I don’t question my BIL’s motives either. He scrupulously honest.

They’re my in-laws but we’ve been married for 34 years. At some point, the “in-law” distinction becomes pretty minimal.

When it comes to inheritance and money, you’d be surprised. In any respect, I’d defer to your wife on what’s fair on her side of the family.

FWIW I’m coming close to 30 years married and am extremely close to my in-laws. I’d never get involved in inheritance issues.

This is the deal breaker.
If the farm is not profitable, your ambit claim is going to force him to go further into debt to buy you out and consequently service a loss operation.
Without a change in fortunes, in a couple of years time you’ll have the unencumbered cash, he’ll be drowning in debt and the only way out would be to sell up the family farm.

As thorny_locust says, its the father who decides and I have no idea of his thinking or motivation but it’s my experience that every farming Dad wants to hand over a viable family property and I think whatever deal gets hammered out it should start with the brother getting a viable farm.

My father passed away a couple of years ago. Four siblings. Sizable land holdings. Younger brother was working it. He got the farm in sole title, debt free. The sisters and I split the off farm assets three ways. In terms of book value lil bro probably got over 75% of the inheritance. But we got cash and I have somewhere my city based kids can see how the bush works.

Mind you, if we had done anything else Mum would have killed us.

On both sides of my family splitting up farm land is unthinkable. You wouldn’t dare even mention it. Whoever cares enough to work it gets the land, end of story. To my way of thinking, the farm should be incorporated, with each member getting a set share of any profits. Everyone should also have a small say in what debts should be incurred, and any long-term leases or permanent structures that are built.

The people not working the land should stay the heck out of it whenever possible, speaking up only if the worker is making really risky decisions.

And I gotta say, receiving only 15% more for doing all of the work sounds like a pretty generous offer to me. Your wife’s brother must love her very much. The fact that you can even speak of selling “your part” of the land makes me want to join the “Stay Out of It” chorus. You don’t split up farm land. Good God, man.

When my FIL inherited the farm from his parents, his 2 sisters received 2/3rds. He eventually bought them both out. AFAIK, there were no hard feelings about any of it even though he was the only one farming.

You’ll need to find out more detail of the arrangements.

Was FIL running the farm in family trust, getting a salary as manager and then the siblings were splitting farm profits three ways?
If the farm needed a new hayshed or tractor did the sisters pay for 2/3rds of it?
When the farm made losses, as all farms do, did the sisters take a haircut too?
When the farm needed a capital injection did the sisters tip in their share or were all parties co-signatories to the debt or was it just FIL?

A useful metric:
Reverse the deal. If brother offered you the farm and he’d walk away for 35% would you get out your cheque book?
If not you are asking too much.

I’m for a 50-50 split. A couple of points that you may want to consider:

  1. Sure, the brother has been working the farm for the last several years. So what? If he wasn’t working there he would be working somewhere else. I assume that he wasn’t working the farm for free and was drawing some pay from the farm. That pay compensated him for his work. Additional ownership of the farm, unless explicitly outlined in an agreement, is beyond his term of employment.

  2. Regardless if he was being paid for his work, the farm wasn’t making a profit. If he wasn’t able to run the farm successfully, why should he be entitled to more than a fair 50-50 split? It seems that most of the value may be in the wind farm potential anyway, so what exactly did his efforts working on the farm do in furthering that? It’s one thing if he was instrumental in securing the wind farm deal, quite another if he was just working there while his father did the deal.

50/50. Your wife has a right to half of the assets (not just the farm ground) of the estate whether her brother farms or not. Now what can be a solution, and I wish my parents would have done it with their estate, is an equalization clause. If the brother wants or gets more farm ground, the equipment (tractors, tools, implements, etc…), the house/acreage the value should be given to the sister in cash to equalize the estate.

Still hard feeling in my family as my parents left one of the heirs close to $400,000 more in assets (land) than the rest of us, but the cash was split evenly per the will. A lot of family friction would have been avoided if they had the equalization clause and used some of the cash to make up the difference in the disparity of the value of assets.

The difference between my situation and yours is my parent’s always said their estate was to be divided equally (and the land was) when they died, but due to the different values of the land, in reality it wasn’t.

As much of the monetary value may be in buildings and equipment, 35% of the monetary value is likely to be a whole lot more than 35% of the land.

Depending on what’s being farmed and what exactly the land is like, the place may or may not be viable with a great deal less land.

Are we talking about a thousand acres all on a similar grade and the same soil type, or 50 acres half of which is steep hillside and/or wetlands, or something inbetween? Is there an area that could be turned into a housing cluster while leaving the rest of the farm still viable, and if so is there a market in the area for such housing? Is part of the place 8’ of topsoil and other parts have rock outcrop to within 12" of the surface? Is the place growing herbs for direct market, or corn/soybeans for commodity sales?

As others have said, are you going to put 35% or 40% or whatever of financial input into anything other than the taxes? How about paying 35% or 40% of what your brother-in-law’s labor is worth?

We’re talking about a thousand acres that is all roughly the same, at least when viewed from my distinctively non-farming POV. There is no other commercial value to the land other than the potential for wind farming and oil and gas production. The land is primarily used for wheat and cattle.

I’m not trying to be obtuse but I guess I’m missing something when it comes to putting in additional money or paying my BIL. If he wants to farm our share and he pays us enough to cover the property taxes on the land, why does he need anything else from me? He’s taking the farming risk and is potentially gaining all of the reward. I know that there are leases where the landowner gets proceeds from the crops but I’m not really interested in that. I really am trying to make this the easiest financially for my BIL without having to saddle myself with the additional burden of farming risk.

I’m trying to point out that you don’t want to take any of the burden of farming risk; and therefore I don’t really see why you feel entitled to own part of the farm.

I don’t really understand the people who think that each child has to inherit an equal, or even a significant, share of everything, even if their needs and/or their input are drastically different. The parents are entitled to divide things up as they please – or for that matter to go blow it all in Vegas. It’s a good idea for them to be clear about their intentions in such cases, if only because a child who’s been putting their life into being part of a farm (or other) operation is entitled to know in advance if they can’t expect to inherit it in a usable form before they’ve given up years to it. But I don’t see why you seem to think that, if they’re telling you that you might get a given percentage, you’re supposed to take that as a starting point for negotiations and are entitled to demand more.

What if your father-in-law is about to, possibly unexpectedly, incur huge medical expenses? There may not be anything for anyone to inherit. The person doing the farmwork is taking a huge risk, right there; but they’re putting the work in anyway.

I 100% agree that my in-laws are entitled to do whatever they want with their assets and I never meant to imply otherwise. And as a matter of fact, my FIL is in EXTREMELY poor health and if he survives another month, I’ll be surprised. My MIL is also in poor health but she’s not critical like he is.

I guess the reason that I think that my wife should inherit some significant portion of the estate is because that’s just the way that everyone around here does it AFAIK. That’s certainly the way that my wife’s grandparents divided their assets. I’m not demanding anything. I believe that the “financial guy” came up with the numbers by himself and without any input from any family member. That’s why I started the thread, to see if his numbers are reasonable and equitable. The whole family will meet with him in a week or 2. I’ll know more then.