Using actuarial tables, I calculate that a 5% difference will equate to an extra inheritance for my children of around $250K. It’s not exactly chump change but nothing I’m going to raise a stink about either.
Yes, there are codes about distribution in cases in which there is no will. But we’re not talking about a case in which there is no will. We’re talking about a case in which they’re apparently discussing what to put in the will. The OP’s parents are still alive. There’s no need to hunt for old documents about the father’s wishes about the farm because he and his wife are still alive and able to express them. Apparently among their current wishes is that they consult with this particular financial guy.
That’s taking the amount and calculating how much you think it will increase in value by the time you die?
That’s a pretty exaggerated way to look at it. Do you evaluate all your expenditures that way?
No. Just investments.
Okay. I don’t find that a very useful way to look at it, because I don’t know all the assumptions you’ve built into your model.
I agree that’s an odd way to look at things, because you’re artificially inflating something into a figure that seems like a lot of money. But that’s only because money that far into the distant future is worth a different amount, and we don’t have a good intuitive feel for it. By then, a loaf of bread could cost $25 and $250k could be a schoolteacher’s salary. Except, of course, all the schoolteachers will be robots.
OK. Well, it’s $50K now. Not exactly chump change but nothing I’m going to raise a stink about either.
Good to hear you’re not going after the 5%, but the question remains. What makes you think you have any say in anything that goes on with your wife’s private family matters. You may take care of your family’s finances, but that has no bearing, probably especially legally on what your wife’s family does with their finances.
When you say the “…whole family will meet…”, does that include you? Or is it just your wife and in-laws? IMO, unless you’re specifically invited and legally acknowledged as a part of the decision making you have no right to say or suggest anything.
Edit: BTW, the fact that you weren’t informed about the financial director’s plans may be clue as to your standing in this matter.
I’m invited.
Thinking outside the box, you mark off a 1-acre area. Hook up each family to a plow and everyone goes until the whole acre is plowed. Whatever percentage of the acre you plowed, that’s your share.
I am not absolutely sure this is what is going on. All the OP knows is that “some guy” viz. the family financial advisor (who is not a family member) came up with some numbers from God knows where and is trying to change the split of assets from those already in a legal trust. I think the OP has a perfect right to help his wife protect her interest up until he knows why this is going on.
My 2c is that there is something nefarious going on. There’s a possibility of the property going from a farm losing money to being a profitable(?) wind farm and now this financial guy (again not a family member) starts trying to change the trust throwing out numbers ex nihilo just as his father-in-law is near death. I say Nars’ wife is owes some answers beyond “This guy who is not a family member feels you should get this much of the property.” And it sounds like Nars’ wife hasn’t even been told what 35% even means? The assets besides the farm? 35 ac. while BIL gets 65 ac.? 35% interest as a joint tenent? Is that last one legal in that state (cf Colorado where joint tenency in common* means each would get 50% i believe). I really think Nars (or rather Nars’ wife) needs to find out who instigated this and why.
*There is a second joint tenency in Colorado as well that is different
If you are going to have a family financial adviser (which is a good idea) it is a very good idea that they are not family. A source of objective and independent advise rather than vested or conflict of interest, who can be changed if/when necessary, that sort of thing.
I wouldn’t give 2c for your 2c. I would suggest this advisor has likely advised FIL for some time. Is the advice top shelf? Don’t know. There’d be no issue getting a second or third opinion. The adviser might welcome a second opinion. The starting point should be that this is being given as impartial advise not “ex nihilo” but towards a purpose in accordance with FIL’s wishes. After all it’s his will.
Where does the “change the trust” notion come from? The sole trustee on FIL’s passing will be MIL.
Don’t know how informed his wife is about the valuation but Nars has said that 5% =$50k. And there is a big difference between an inheritance of a % ownership of a loss making farm and an inheritance of that same percentage of the farm’s value as a cash settlement. Which is the OP’s starting point.
Given the new website, I’m not even going to try to appropriately multi-quote this response so I’ll just use a list.
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I have no issue with the financial guy. I think he’s doing his best to keep my BIL afloat. I’m glad that the family has one.
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I 100% disagree that anything nefarious is going on.
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It does seem that a change to the trust is in the works. Currently, after the death of my MIL, the estate is to be split 50/50. Those percentages are most likely what will be changed.
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At this point, no one knows the actual valuation of the assets. My number was just a WAG of the value of the land using fairly conservative numbers. I didn’t include any equipment in it. As has been pointed out elsewhere, getting a third party estimate of the value of all assets is in order.
Well, with continuous scrolling and my inability to multi-quote, I’m just posting a short response ignoring both the good and the bad advice above. In my opinion, there is no way to know what is an equitable split now but it is possible for your in-laws to specify an equitable method to divide their estate. .
My advice to your In-laws would be to find an independent trustee and good estate planning attorney. These could even be the same person. Farm and other investments should go into the trust. In-laws should decide how much they owe brother-in-law for all his past services. Either gift it to him in cash now or make it a debt of the trust, earning interest for your brother.
Trustee and brother-in-law, in consultation with in-laws, should determine how much to pay brother-in-law for his services running the farm and caring for the parents each year. If brother-in-law stops farming, or stops caring for the in-laws, the trustee will reduce brother-in-law’s earnings from the trust. If your wife takes up farming or caring for the in-laws, trustee can start to pay her too. If the in-laws/farm can’t pay brother-in-law, the brother-in-law’s fee (and your wife’s fee, should she earn any) should become a debt owed by the trust. The trust should pay a reasonable interest rate each year on the debt, which can also be rolled over as needed until paid back.
When the in-laws die or shuffle off to a nursing home, the trust pays its accrued debts to brother-in-law and to your wife. The remainder of the trust assets should be divided according to your in-laws’ wishes, but for most people it would be something like 50/50 to each of the kids. Your brother-in-law’s relatively large efforts for the farm and the in-laws have already been rewarded appropriately. The kicker is, if the trust has incurred a large debt to the brother-in-law, and if your wife has earned little or nothing, brother-in-law will inherit more than your wife.
If in-laws die next week, the split is roughly 50/50, except for the part your brother in-law collects for his past services. If they die in a few years, brother-in-law gets a much larger portion of the trust assets due to his deferred earnings and accrued interest. It might be enough that he gets the farm free and clear, or he forgoes some trust investment assets to take the farm free and clear. No need to divide the land.
If the farm converts to a passive wind farm and no one is farming it, naturally brother-in-law stops earning a farm management fee, so he stops accruing a bunch of farm management fees. Maybe the wind farm earns enough to pay back brother-in-law’s accrued fees, and so at your in-laws’ deaths, whenever that might be, the trust doesn’t owe him any additional money and he and your wife both inherit 50% of the wind farm and other assets.
It’s easy to say “The split should be 50/50” but the majority of farm assets are the land and the equipment to plant and harvest it. Those things are tools with which to make a living, but not worth much if you sell them off. They are something at least two generations have sweat and bled to leave to the next generation, and there’s a next member who’s interested in working it. So it would be sacrilege to divide it up in such a way that you make the concern untenable. It sounds like the farm is already struggling, but that may be a function of BIL having to divide his time and follow FIL’s wishes in day-to-day management. It’s also true that MOST farms are suffering now, and most Americans believe that this time next year the contributing problem will have retired to Florida.
So how to divide it? As a corporation. Profits can be divided 50/50. I like the idea above of paying the BIL a base salary for his farming work, and then splitting the profits equally. That way if he decides the best use of land is as a wind farm he’s not losing out on anything. If he decides to hire someone to run the farm his salary should be reduced i/a/w the number of hours he works, but he still gets 50% of profits.
Sounds like it’s already untenable. The fact is that the country needs less and less farmland over time. The previous generation’s sweat and blood are sunk costs and irrelevant. Although obviously if the inlaws want to partially cut out one kid to keep propping up the delusion, that’s their prerogative.
Although as you mention, there are ways to do a 50/50 asset split without splitting the land. They’re certainly more complicated though.
Seems unlikely.
The population’s going up. Some of what used to be good farmland has become too polluted, too built on, or too liable to flooding to be usable. Other areas have been running on mined water, and the dropping water tables are causing increasing problems. And we’re losing topsoil, every year, and have been for decades. Attempts to make up for the loss of natural fertility by adding increasing amounts of nitrogen fertilizer are causing pollution problems including water contamination and greenhouse gases.
And I don’t see why the sweat the current and previous generations have put into it are irrelevant, but the fact that the OP’s wife is a child of those generations is supposed to be relevant. If everything the family’s done in previous years doesn’t matter, then their producing and raising her shouldn’t matter either, should it?
“Unlikely” is a strange word to describe a historical trend since the 1950s. See USDA ERS.
I guess this is the crux of your original question. If the only consideration is keeping your brother afloat on a family farm losing money then there is no consideration. Give him whatever he needs from the estate up to 100%. If the only assets are farmland and farm equipment then I guess your wife gets nothing.
Something that occurs to me. Are there family dynamics at work here? Like FIL/MIL wanting to give their son more since your wife is more successful? An obligation since he stayed and worked the farm? I doubt it is male children over female children with regards to inheritance since it was originally 50/50. I know that you say you trust everything that’s going on but as an outsider looking in there is something a little off about this. I think that it is the fact that despite this being a huge family decision, your wife is not being given any information like who asked for this change, what are the assets, how the division will occur (like land, money, etc.), how did the advisor decide on these numbers, etc.
Isn’t that what the meeting is? A chance to discuss all that and give all parties the relevant information?