An evaluation of the business arrangement between two brothers last year illustrates a not-uncommon problem on family farms.
The older brother left the farm after college because there was inadequate income to support him, his parents and his younger brother. The older brother had a successful career in an ag-related field and lived close to the family operation.
Over the years, the older brother purchased land and machinery used by the farm and built some buildings rented to it. Older brother’s three children enjoyed growing up on the farm and all entered the workforce in ag-related careers after college. The youngest son of the older brother took an active role in helping during the busy seasons.
Older brother retired and began to devote additional time to the family farm. By then, the parents had passed away and the son of younger brother joined the farming operation.
Older brother thought about how his family could continue to be active in the family operation. His solution was that his youngest son would join the operation at some future time.
The problem? The plan was all one-way.
Younger brother liked the existing business arrangement and didn’t feel there was enough income to support the two full-time family members, plus a new mouth. Younger brother was happy to rent land from older brother and trade equipment use for some part-time labor.
The biggest surprise to older brother came when we interviewed his youngest son. Older brother thought his youngest son had expressed an interest in coming home by contributing labor and assets. However, he had not counted on the input of his daughter-in-law and the life she and his son had built for their growing family. Youngest son had a job that compensated him very well and his family enjoyed small-town life.
Older brother’s mistake was not sharing his plan or goals with his younger brother or his family. He assumed that everyone shared his goals and would welcome his youngest son with open arms.
The majority of my time at the family meeting was playing referee.
Talk to each other
Even though older brother and younger brother worked together, they never developed a plan for both families. Younger brother developed a plan for his family because he considered himself the actual farmer of the family. Older brother assumed that there was a place for anyone who wanted to join the operation.
They should have held a meeting to decide how and when family members might join the operation. Since younger brother ran the operation, he should have been the primary family member making plans for the farm.
Younger brother viewed older brother and older brother’s family as “investors” and not farm operators. Older brother should have discussed the possibility of his son joining the operation if younger brother needed additional labor and adequate cash-flow existed.
Timing and planning
If younger brother was interested in having the son of older brother join the operation, then it would have been time for older brother to discuss the issue with his son and help sponsor a plan satisfactory to all parties.
The youngest son should have been placed into an internship program for a couple of years to make sure all parties could successfully work together. Then, and only then, should the son of the older brother have entered into a formal agreement to become a farm owner.
Older brother attempted to impose his goals on both his youngest son and younger brother. The result was three unhappy family members.
The family finally did start speaking to each other after a few months of working through the problem. Each family unit is evaluating their contribution to the farm and is planning for the farm’s future management.
Darrell Dunteman is an agricultural financial consultant and accountant with Bonnett and Dunteman, Certified Public Accountants and Consultants with offices in Bushnell and Havana, Ill. Contact Dunteman at: email@example.com.